Goldman Sachs is discussing derivatives trading with bitcoin and other cryptocurrencies through a possible partnership with cryptocurrency exchange FTX, according to a report from Barron’s.
“We have multiple FCMs [futures commission merchants] already committed to integrating technologically with the exchange,” Brett Harrison, the president of FTX’s U.S. division, said in an interview with Barron’s. “There are several large ones you can probably name.”
FTX is reportedly seeking a license modification from the Commodities Futures Trading Commission (CFTC) which would allow the exchange to function as both a cryptocurrency exchange and an intermediary for leveraged derivatives trading (FCM). Interestingly enough, this role is currently held by institutions such as Goldman Sachs.
This denotes a stark wind change in which institutions who would have typically handled counterparty transactions with leverage before are now turning to other, more experienced service offerings. The report noted that FTX seems to be absorbing some of the market share of those who, historically, would be considered direct competition on Wall Street.
Should FTX be successful in this endeavor, this threatens the removal of intermediaries such as Goldman by providing derivatives in-house, as opposed to needing the cooperation of another financial institution. This has led to friction from the Futures Industry Association, which represents many of the intermediaries who would be affected as the association fears FTX could extend past cryptocurrencies into other markets.
Reportedly, the FTX integration could include directly trading futures contracts, the intermingling of clientele, a possible on-ramp being provided to Goldman to access the exchange, or providing capital top ups (stock options to increase equity positions) for clients.
