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News

FTX Fallout Causes CFTC To Make Bold Move In Supervising Derivatives Trading

November 10, 2023 - Around 2 mins mins to read

Key Points:

  • The U.S. Commodity Futures Trading Commission is drafting stricter rules for derivatives exchanges to protect customer funds.
  • The rules will apply to direct-to-customer trading, inspired by the FTX fallout.
  • The aim is to ensure asset segregation for all such firms, driven by the recent FTX CEO conviction.
In response to the FTX fallout, the U.S. Commodity Futures Trading Commission (CFTC) is working on a draft proposal aimed at ensuring more derivatives exchanges keep client funds separate from their corporate cash.
FTX Fallout Causes CFTC To Make Bold Move In Supervising Derivatives Trading
FTX Fallout Causes CFTC To Make Bold Move In Supervising Derivatives Trading 2

CFTC Proposes Stricter Rules for Derivatives Exchanges Amid FTX Fallout

This move comes as part of broader efforts by U.S. regulators to prevent customer funds from being misused or lost. The draft proposal, reported by Bloomberg, seeks to expand the scope of existing regulatory safeguards to apply to exchanges that allow customers to trade without going through a brokerage firm.

Kristin Johnson, a Democratic member of the CFTC, emphasized the need for rules that mandate the segregation of customer assets, not just for crypto-related companies but for any firms employing direct-to-customer models, including those dealing with various types of derivatives.

Regulatory Response to FTX Collapse: Protecting Customer Funds at the Core

This move is prompted by the FTX fallout, which saw the exchange’s former CEO, Sam Bankman-Fried, convicted of fraud and conspiracy. Bankman-Fried had directed customer funds into risky investments, political donations, and real estate, leading to the company’s collapse.

Notably, LedgerX, a former subsidiary of FTX, successfully maintained customer and company asset separation, emerging as a solvent entity amid FTX’s bankruptcy. The CFTC had explicitly required LedgerX to segregate customer funds from its own, ensuring the safety of client assets.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

Bankman-Fried

CFTC

FTX

LedgerX

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Author

Harold

With a passion for untangling the complexities of the financial world, I've spent over four years in financial journalism, covering everything from traditional equities to the cutting edge of venture capital. "The financial markets are a fascinating puzzle," I often say, "and I love helping people make sense of them." That's what drives me to bring clear and insightful financial journalism to the readers of Coincu.
News

FTX Fallout Causes CFTC To Make Bold Move In Supervising Derivatives Trading

Key Points:

  • The U.S. Commodity Futures Trading Commission is drafting stricter rules for derivatives exchanges to protect customer funds.
  • The rules will apply to direct-to-customer trading, inspired by the FTX fallout.
  • The aim is to ensure asset segregation for all such firms, driven by the recent FTX CEO conviction.
In response to the FTX fallout, the U.S. Commodity Futures Trading Commission (CFTC) is working on a draft proposal aimed at ensuring more derivatives exchanges keep client funds separate from their corporate cash.
FTX Fallout Causes CFTC To Make Bold Move In Supervising Derivatives Trading
FTX Fallout Causes CFTC To Make Bold Move In Supervising Derivatives Trading 4

CFTC Proposes Stricter Rules for Derivatives Exchanges Amid FTX Fallout

This move comes as part of broader efforts by U.S. regulators to prevent customer funds from being misused or lost. The draft proposal, reported by Bloomberg, seeks to expand the scope of existing regulatory safeguards to apply to exchanges that allow customers to trade without going through a brokerage firm.

Kristin Johnson, a Democratic member of the CFTC, emphasized the need for rules that mandate the segregation of customer assets, not just for crypto-related companies but for any firms employing direct-to-customer models, including those dealing with various types of derivatives.

Regulatory Response to FTX Collapse: Protecting Customer Funds at the Core

This move is prompted by the FTX fallout, which saw the exchange’s former CEO, Sam Bankman-Fried, convicted of fraud and conspiracy. Bankman-Fried had directed customer funds into risky investments, political donations, and real estate, leading to the company’s collapse.

Notably, LedgerX, a former subsidiary of FTX, successfully maintained customer and company asset separation, emerging as a solvent entity amid FTX’s bankruptcy. The CFTC had explicitly required LedgerX to segregate customer funds from its own, ensuring the safety of client assets.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.