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FTX.US trading volume approaches that of Binance.US, CEO reveals acquisition of LedgerX's "three key licenses"

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FTX.US trading volume approaches that of Binance.US, CEO reveals acquisition of LedgerX

FTX.US CEO Brett Harrison tweeted the weekly trading volume, showing that FTX.US's trading volume is approaching that of Binance.US; additionally, he mentioned that the acquisition of LedgerX and obtaining the "three licenses" will allow FTX.US to offer crypto derivatives to retail investors, even equity tokens, which will be a unique selling point for FTX.US.

Acquisition of LedgerX Obtains Three Key Licenses, What's the Catch?

Compared to FTX and Binance exchanges, FTX.US and Binance.US trading volumes are not impressive, as they currently only offer "spot trading" within the United States. It is worth noting that this will change after FTX.US acquires LedgerX.

In August, FTX.US announced the acquisition of the U.S. compliant derivatives exchange LedgerX, with the acquisition expected to be completed this month. This acquisition has led FTX founder Sam Bankman-Fried to describe it as "the most exciting" in history.

This is because LedgerX is the only entity with three complete CFTC regulatory licenses in the United States, including DCM, DCO, and SEF, which will allow FTX.US to offer cryptocurrency derivatives and even tokenized equities directly to retail investors in the future.

According to the U.S. Commodity Futures Trading Commission (CFTC) website, the functions of the three licenses are as follows:

  • DCM Designated Contract Market, allows exchanges to offer futures and options trading based on existing commodities, indices, or investment instruments.
  • SEF Swaps Execution Facilities, enables entities to execute swaps under CFTC oversight.
  • DCO Designated Clearing Organizations, a non-intermediary entity that facilitates clearing and credit risk transfer among participants. Obtaining a DCO license also requires holding SEF and DCO licenses.

LedgerX obtained the three licenses in September 2020, becoming a fully-collateralized provider of futures or options clearing services, not limited to digital currency products.

It is well known that the United States has a comprehensive regulatory framework and licensing system for derivatives trading. Currently, only CME Chicago Mercantile Exchange and ICE Intercontinental Exchange can offer cryptocurrency derivatives trading services in the U.S.

Unfortunately, CME and ICE do not directly provide services to retail investors, who must trade bitcoin futures through Futures Commission Merchants (FCMs). With the acquisition of LedgerX, FTX.US will be able to offer a diverse range of cryptocurrency derivatives services to both retail and institutional investors, an area in which FTX excels.

Brett Harrison also mentioned on Twitter that after acquiring LedgerX, FTX.US will be able to:

  1. Provide cryptocurrency futures and options to retail investors, with a user experience similar to FTX, including mobile apps, website services, and access to transparent market data.
  2. Offer cryptocurrency futures and options to institutional investors.
  3. Provide clearing services to other exchanges. This service requires both DCM and DCO licenses, so exchanges that only have a DCM license may need to work with FTX.US.

Furthermore, Brett Harrison revealed that these three licenses will allow FTX.US to offer "derivatives not limited to cryptocurrency products," which aligns with SBF's statement in a Bloomberg interview that they hope to offer tokenized equities on FTX.US in the future.

"Our goal is to become a regulated exchange in the U.S. where you, as a user, can trade everything. Acquiring LedgerX is a big step towards that goal." - Brett Harrison concluded.