The founder and CEO of cryptocurrency exchange FTX, Sam Bankman-Fried has supported the idea of knowledge and disclosure tests to protect retail investors, but has said it should not be specific to just cryptocurrencies..
Bankman–Fried tweeted your thoughts in response to an idea raised by US Commodity Futures Trading Commission (CFTC) Commissioner Christy Goldsmith Romero on October 15, saying that establishing a “domestic retail investor” category for derivatives trading could give greater protection to consumers.
Romero said that Due to cryptocurrency, more retail investors are entering the derivatives markets, and called on the CFTC to separate these investors from professionals and high net worth individuals and to have “disclosures written in a way that ordinary people understand or can be used in weighing the rules on the use of leverage”.
Derivatives trading occurs when traders speculate on the future price of an asset, such as stocks, commodities, fiat money, or cryptocurrencies, through the buying and selling of derivative contracts, which may involve leverage.
The founder of FTX said that he is “100%” in agreement with being forced to disclose information and to carry out knowledge tests to all Future Commission Merchants (FCMs) and Designated Contract Markets (DCMs) dealing with retail traders, adding that “it might make sense”.
He added, however, that it “doesn’t make sense” for the disclosures and tests to be specific to cryptocurrencies, and suggested that these should apply to all derivative products..
DCMs are CFTC-regulated derivatives exchanges that offer products such as options or futures that can only be accessed through an FCM.which accepts or solicits orders from clients to buy and sell futures contracts or futures options.
Bankman-Fried’s comments come at a time when FTX.US, the US-based entity of FTX, is looking to launch cryptocurrency derivatives trading, and the exchange has already created a knowledge test that could be used for your platformaccording to Bankman-Fried.
The CFTC is stepping up its efforts to become the regulator of choice for the US cryptocurrency market. as calls for regulatory clarity become more persistent.
On Sept. 27, CFTC Commissioner Caroline Pham said the regulator should create an office focused on retail cryptocurrency investors to expand its consumer protections.. The proposed office would be modeled after a similar office of the Security and Exchange Commission (SEC).
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