President and CEO Dennis M. Kelleher issued the following statement in connection with sending a letter to Commodity Futures Trading Commission (CFTC) Chair Russ Behnam raising concerns related to the consideration of FTX’s auto-liquidation proposal:

Why It Matters.  FTX has filed an application with the CFTC that, if approved, will likely vastly increase the participation of retail investors in the cryptocurrency futures markets via cellphone apps without intermediaries but with around-the-clock, second-by-second auto-liquidation of their margin accounts.  The crypto carnage, volatility, and wealth destruction over the last few days and weeks are red flags as to the threats posed to customer protection and systemic stability by cryptocurrency investments.  This is remarkably reminiscent of the “meme stock frenzy” of early 2021, a basket of which are now down more than 60% and resulted in billions if not tens of billions of dollars in customer losses.

What We Said. Better Markets sent a letter to Chair Russ Behnam of the CFTC urging him to ensure the process for considering FTX’s application to offer 24/7/365 margining and direct clearing for futures contracts on Bitcoin is transparent, robust, and meaningly inclusive of all viewpoints. The letter asks that the CFTC approach the application of FTX to change its derivatives clearing organization (DCO) registration to allow it to offer direct clearing to customers for futures contracts on Bitcoin with a balanced, deliberative, and transparent process focused on the public interest.

Bottom Line. To ensure that the public has confidence in whatever decision the CFTC makes on the application, we urge Chair Behnam to ensure that future actions on FTX’s application are fully transparent and designed to ensure that the viewpoints of all stakeholders are seriously considered, not just those of the industry.

Read our full Comment Letter here or click the button below.