The cryptocurrency exchange FTX has launched stock trading capabilities for its customers via the U.S. Division. The company, headed by Sam Bankman-Fried, co-founder and billionaire, said in an announcement that the launch would be in private beta to a limited number of customers from a waiting list prior to it goes live in the second quarter of 2022.
FTX, the second-largest cryptocurrency exchange around the globe, has announced it will provide “hundreds of U.S. exchange-listed securities, including common stocks and ETFs,” including fractional shares of certain securities.
It is notable that FTX intends to channel all transactions through Nasdaq instead of a third-party market maker. The exchange has stated that it won’t receive payments for orders flow (PFOF), a method used to fulfill orders. Robinhood has become famous for. This requires the exchange to receive payments from market makers in exchange to direct orders through their channels. This is a controversial method of clearing trades as it typically means that the investor does not receive its shares for the most favorable price as the market maker makes money through the spread.
Robinhood remains to use PFOF because it could generate substantial profits from third-party market makers. FTX however will not be able to make any profit generated by its share trading offerings as it will be offering the service to customers without any fee or commissions to be that is charged for exchange.
FTX is also claiming to allow customers to pay for their brokerage accounts through the platform using fiat-backed stablecoins like USDC (these differ from the algorithmic stablecoins such as Terra (UST) that are supported by other cryptocurrencies and do not hold reserves as such in the typical sense). The exchange claims it will be the first exchange to offer this feature, however customers can also be able to fund their accounts through traditional methods like wire transfer, ACH transfer and card deposit.
FTX will also not make customers hold a minimum balance to be eligible for the no-fee account, according to the statement.
This announcement is a significant moment in Bankman-Fried’s plan to grow FTX from an institution-centric platform with deep roots in trading and to an online exchange which meets the wide range of requirements of investors who are retail. Bankman-Fried announced in a filing this week that he’d purchased shares in Robinhood valued at 7.6 percent of the company. This could be another step towards this goal.