Bankman-Fried 100% Supports Knowledge Testing For Retail Derivatives Traders

Sam Bankman-Fried, the founder and CEO of the cryptocurrency exchange FTX, has endorsed the notion of knowledge tests and disclosures to safeguard retail investors but argued that they shouldn’t be crypto-specific.

In response to a suggestion made by Christy Goldsmith Romero, commissioner of the Commodities Future Trading Commission (CFTC), on October 15, Bankman-Fried tweeted his opinions, arguing that the creation of a “household retail investor” category for derivatives trading could result in stronger consumer protections.

The CFTC should distinguish between professional and high-net-worth investors and have disclosures that are “written in a way that regular people understand or could be used when weighing rules on the use of leverage,” according to Romero, who claimed that the rise of cryptocurrency has led to an increase in the number of retail investors entering the derivatives markets.

By purchasing and selling derivative contracts, which may involve leverage, traders speculate on the future value of an asset, such as a stock, a commodity, a fiat currency, or a cryptocurrency.

The founder of FTX stated that he “could make sense” and that he “100%” agrees with requiring disclosures and knowledge exams for all Future Commissions Merchants (FCMs) and Designated Contract Markets (DCMs) who deal with retail traders.

The disclosures and testing, he continued, don’t “necessarily make sense” to be specific to cryptocurrencies; rather, they should apply to all derivative products.

Only through an FCM, which accepts or solicits customer buy and sell orders on futures or futures options contracts, can customers access DCMs, which are derivative exchanges governed by the CFTC and on which products like options or futures are offered.

The remarks from Bankman-Fried are from FTX

According to Bankman-Fried, US, the US-based subsidiary of FTX, plans to begin trading in bitcoin derivatives, and the exchange has already developed a knowledge exam that might be used to its platform.

As demands for regulatory clarification grow louder, the CFTC is stepping up its attempts to become the regulator of choice for the American cryptocurrency sector.

In order to increase consumer protections, CFTC Commissioner Caroline Pham stated on September 27 that the regulator should establish a cryptocurrency retail investor office. The proposed office would be based on a comparable office at the Securities and Exchange Commission (SEC).

Coincu will continue to update the situation related to Sam Bankman-Fried, you can find out more information through this article.

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