Bankman-Fried faces down roomful of futures industry insiders at CFTC roundtable

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FTX CEO Sam Bankman-Fried did a lot of talk­ing at the Unit­ed States Com­mod­i­ty Futures Trad­ing Com­mis­sion (CFTC) staff round­table on non-inter­me­di­a­tion Wednes­day. He field­ed ques­tions and issues from 31 indus­try pro­fes­sion­als about the FTX.US appli­ca­tion to offer clear­ing of mar­gin­ed prod­ucts, includ­ing cryp­to-based prod­ucts, with­out a futures com­mis­sion mer­chant (FCM) intermediary. 

Many par­tic­i­pants felt the need to men­tion their devo­tion to inno­va­tion and declared that they do not see the pro­posed new tech­nol­o­gy as an “us ver­sus them” sit­u­a­tion. Joe Cisews­ki of Pan­tera Cap­i­tal said that just six or eight clear­ing hous­es dom­i­nate the mar­ket at present, so new com­pe­ti­tion would not be out of place. Like many oth­ers present, he saw the need for more reg­u­la­to­ry frame­work for this new trad­ing model.

“We don’t know what a cryp­to mar­gin is,” said Hilary Allen, Pro­fes­sor of Law at Amer­i­can Uni­ver­si­ty. Alli­son Lur­ton of the Futures Indus­try Asso­ci­a­tion (FIA) empha­sized that FCM reg­u­la­tions are pre­scrip­tive and not prin­ci­ples-based because of the mer­chants’ “core posi­tion” in the sys­tem, and many rules and reg­u­la­tions would have to be revised for the pro­posed non-inter­me­di­at­ed trad­ing system.

Chris­tine Park­er of Coin­base said, “We don’t real­ly have a good view of what a retail trad­er in the cryp­to space […] would design in a mar­ket.” Park­er, com­ment­ing on the company’s expe­ri­ence out­side the U.S., said cryp­to trad­ing does not fol­low the pat­terns of tra­di­tion­al com­modi­ties. She was one of sev­er­al peo­ple who con­sid­ered trad­ing options abroad supe­ri­or to those in the U.S.

Sev­er­al peo­ple also point­ed out the ways in which the cur­rent sys­tem inten­tion­al­ly dif­fers from the auto­mat­ed solu­tion FTX is propos­ing. The frame­work for 24-hour clear­ing already exists, Lur­ton and oth­ers point­ed out, but there are rea­sons not to use it. The pro­posed trad­ing algo­rithm would have to respond go unex­pect­ed sit­u­a­tions, Allen said, noting:

“That’s not what algo­rithms do, […] that’s what reg­u­la­tors are for.” 

Todd Phillips of the Cen­ter for Amer­i­can Progress sug­gest­ed that the role of the CFTC is to make sure invest­ment prod­ucts are appro­pri­ate for con­sumers. Pos­si­ble round-the-clock clear­ing “isn’t some­thing we want our retail investors get­ting into,” he said. Bankman-Fried took umbrage at this sug­ges­tion, call­ing it con­de­scend­ing and say­ing that “a lot of peo­ple know more than the peo­ple in this room” about mar­gin­ed trading. 

“I was expect­ing some­thing far more con­tentious,” mod­er­a­tor Robert Steiger­wald of the Fed­er­al Reserve Bank of Chica­go said lat­er in the six-and-a-half-hour session. 

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