Sam Bankman-Fried, the CEO and founder of cryptocurrency exchange FTX, has supported the idea of knowledge tests and disclosures to protect retail investors. Bankman-Fried said that a knowledge test for derivative retail customers could make sense, but it shouldn’t just be crypto-specific.
On the 15th of October, Christy Goldsmith Romero, the commissioner of the Commodities Future Trading Commission, said that due to crypto, more retail investors were entering the derivatives markets, where they called for the CFTC to separate these investors from high-net-worth individuals.
Moreover, she said that the investors have disclosures written in a way that regular people understand or could be used when weighing rules on the use of leverage. Bankman-Fried tweeted his thoughts in response to Christy’s idea, as he said the establishment of a household retail investor category for derivatives trading could give greater consumer protections.
When traders speculate on the future price of an asset, such as stock, or commodities, through the buying and selling of derivative contracts, then then they are doing Derivatives trading.
Bankman-Fried said that he 100% agrees with mandating disclosures and knowledge tests for all Future Commissions Merchants and Designated Contract Markets that face retail traders, which could make sense. Moreover, he said it doesn’t necessarily make sense for the disclosures and tests to be specific to cryptocurrencies. He suggested that these should apply to all derivative products.
DCMs are CFTC-regulated derivate exchanges where products such as options or futures are offered, and that can only be accessed through an FCM. The FCM accepts or solicits buy and sell orders on futures or options contracts from customers.
Bankman-Fried’s comments come as FTX.US, which is a firm, that is looking to launch cryptocurrency derivatives trading. According to Bankman-Fried, the exchange has already created a knowledge test that could be used for its platform.
