11.09.2022

FTX Must Withdraw Clearing Application Before CFTC

11.09.2022
FTX Must Withdraw Clearing Application Before CFTC

Better Markets President and CEO Dennis M. Kelleher issued the following statement regarding FTX’s pending application before the Commodity Futures Trading Commission (CFTC) to offer non-intermediated, margined clearing of Bitcoin futures products that eliminated critical layers of clearing house protections:

“FTX has an application pending before the CFTC to eliminate FCMs and other critical layers of financial protection for clearing houses because, it claimed, it has the financial wherewithal to ensure clearing house resilience and systemic risk reduction.  The reported fire sale by FTX of its non-US operations to Binance so that it has the liquidity to meet its current obligations proves that FTX does not have the financial wherewithal represented in its application.  Additionally, other systemic risks with FTX’s proposal that we identified in our comment letter opposing the application have now, directly or indirectly, materialized and independently require the application to be withdrawn or rejected.

“FTX’s application was always flawed because it’s novel, untested, and high-risk proposal to dramatically change the structure and operations of the clearing house model, which has proved itself through multiple crises, depended upon FTX’s representations of its financial strength, as Better Markets discussed in its comment letter.  The crypto carnage, volatility, and wealth destruction over the last twelve months were red flags of the threats posed to customer protection and systemic stability by cryptocurrency investments generally.  While events are still unfolding rapidly, recent events have once again proved that those risks are real and systemic, this time as specifically applicable to FTX itself.

“Given that the concerns and risks detailed in our comment letter have materialized, FTX should immediately withdraw its application.  If it fails to do so, the CFTC should immediately deny the application.”

Read our comment letters to the CFTC here and here.

Source: Better Markets

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