Crypto exchange giant FTX took a big step toward offering “a holistic investing service for customers across all asset classes” last month. On May 19th, FTX US (West Realm Shires Services) and FTX Capital Markets announced the launch of FTX Stocks, which will be added to the FTX US trading app as an equities trading platform.
Launch of FTX Stocks
Since FTX US became a regulated broker-dealer in 2021, investors and users across the industry have been anticipating the launch of FTX’s integrated equities trading platform.
In February, the company set-up a waitlist for the upcoming launch and, on May 19th, FTX Stocks was finally released in a private beta phase. Select US customers who signed up for the waitlist can now use FTX US to purchase stocks and ETFs along with digital assets.
Brett Harrison, President of FTX US, stated that FTX Stocks will allow “retail investors to easily trade crypto, NFTs, and traditional stock offerings through a transparent and intuitive user interface.” He added that FTX US “would like to become the ‘everything exchange’ and the ‘everything app’ when it comes to financial services and fintech in general.”
FTX Stocks will provide no-fee brokerage accounts and commission-less trading along with free fundamental and market data through the platform. Unlike many other popular retail trading platforms, FTX Stocks will not require minimum account balances or use-tiered account systems.
Direct Order Routing
Since 2021, order routing has been a hot topic among retail trading platforms. Most platforms, including Robinhood, use the payment for order flow (PFOF) method, which involves compensating brokerages for directing the orders to market makers.
Critics of this method point to a potential conflict of interest as it gives brokers the opportunity to increase profits by directing orders to specific institutions. This issue became headline news during the WallStreetBets/GameStop fiasco last year.
To avoid these issues, FTX Stocks routes all orders directly through the Nasdaq Exchange. This should make trade execution more transparent and provide fair pricing for platform users. This also means that FTX will not receive payments for order flow.
Fiat-Backed Stablecoin Funding
FTX Stocks is also the first to allow users to fund their accounts with fiat-backed stablecoins like USDC and Binance USD. This would obviously exclude algorithmic stablecoins which have been all over the news lately due to the collapse of TerraUSD.
However, even for fiat-backed stablecoins, there is an added element of risk, so FTX Stocks will lean heavily on its broker-dealer, FTX Capital Markets, and partnership with Embed Clearing to minimize potential problems.
Shopping for Acquisitions
As FTX Stocks continues in beta phase, FTX US is reportedly on-the-hunt for brokerage start-ups. The company has met with Webull, Apex Clearing and Public.com to discuss potential acquisitions in recent months.
All three of these firms are registered with FINRA, the Financial Industry Regulatory Authority, which allows them to provide investment advice and trade stocks on their client’s behalf. All three are also members of the Securities Investor Protection Corporation (SIPC) which protects investors in case of a firm’s collapse. These are important designations as FTX needs to stay on favorable terms with the SEC.
While it appears FTX is focusing on start-up companies for acquisitions at this time, some have speculated that large-scale acquisitions like Goldman Sachs could be possible in the future. In a recent interview, Brett Harrison, President of FTX US, confirmed that the company is looking “for potential merger and acquisition opportunities.”
Build, Build, Build
It’s been a tough year to be in the crypto market, but through all the FUD and drama, one trend is becoming obvious. The big-time players and leaders in crypto are not backing away. They are building. Blockchain is more mainstream now than ever and use-cases are popping up everywhere. Now is the time to build for the future, and leaders like Sam Bankman-Fried from FTX are doing just that.
