Automated additional claims are another matter that the blockchain does not have to fix

"How FTX plans to redesign the US futures market with crypto technology" is the story that runs elsewhere on the Financial Times web space. It explains how the Central Bank of IP by Sam Bankman-Fried "wants to eradicate the brokers who have acted as an intermediary between customers and the stock exchanges in the past 40 years, where shops are done".

SBF officially presented his idea of ​​automated risk management in March to the US supervisory authorities. His proposal provides to use the 24-hour trade with lit crypto futures as a Proof of Concept to gain the trust of the US Commodity Futures Trading Commission.

Anyone who is familiar with CFDs and spread bets will now wonder what the whole vertebrae should. Accounts with advance margin and algorithmic liquidation are part of the European markets and for almost as long for Forex worldwide as there are means.

The problem here is America. The CTFC still has to familiarize itself with the concept that externally financed borrower manages their own risk, which is not undeniably compatible with the Commodity Exchange Act.

ftx used the CTFC to change the standard after bought LedGerx last year, a US futures and option exchange that, according to the current rules, must request complete (or almost complete) customer security. FTX would like to offer you leverage, but not be dependent on futures commission merchants (FCMS) who are the repo men of the market.

fcms have remained because they are quite useful. The placement of a gatekeeper between the stock exchange and the customer helps to bundle collateral, and should ensure that the clearing points have enough to cover a failure. Gatekeeping also offers a certain degree of human discretion at major decisions, for example as Citigroup in March 2020 after giving a margin call.

ftx wants to avoid all of this. "Dramatic improvements in the technological infrastructure in the past twenty years" mean that customers should be given direct access to stock market and clearing services and then should be brought out of loss positions by an unselfish algorithm. The margin surveillance in real time would close accounts in 10 percent steps, whereby FTX releases its risky positions to "liquidity providers" if possible and protects against a disaster with its own $ 250 million cash fund.

SBF leads the FTX's own trade history (August 2020 to the present day) as proof that such a risk management system works and that it is better to cook the frog with regular small liquidations than with occasional large ones. Regulatory authorities, who demanded monitoring of the futures market from a divine perspective after the global financial crisis, are invited to see a microcosm version of what could have looked like on the FTX's dashboards.

blockchain is mentioned in passing because his fans believe that distributed ledger are good for immediate, smooth capital transfers. SBF has talked about that intelligent contracts etc. are a "really nice experience" if they are applied to risk management, but really, every speech of protocol improvements is at best accidental. Hurfishes are all regulatory, not technically. Under the hood, FTX is just as centralized as the average tradfi trading shop; Blockchain does not mention his application letter to the CFTC at all.

only remains the argument about whether the risk management is positive or negative for market stability due to algorithms. But is FTX really the right company to lead it? After all, SBF did not get rich by making crypto less volatile, he became rich by making Fiat losing more easily.

The Nickel-Omnishambles of the London metal exchange in March took

crypto lobbyists as an example of the problems caused by human interventions-while critics argued that the autocratic style of the LME could rather be a symptom for the possession of Hong Kong Chinese than for structural defects. In the meantime, it is not difficult to find examples in which Algos have failed spectacularly to compensate for risks, such as in 2015, when Switzerland increased its currency border and brought a large part of the CFD retail industry to crash.

So far,

regulatory authorities and tradfi companies have been suspicious of the charm offensive of the crypto lobby. As Alphaville found at the time, a round table of the CFTC in May contained a rather angry contribution by Chris Edmonds, Chief Development Officer from ICE, after the managing partner of Coinfund, Chris Perkins, led the infallibility of the big business as an argument to support the proposal of FTX. (Perkins was responsible for the Clearing unit of Citi in March 2020 when the claim was dispensed with.)

A cynical view is that US trading has opposed innovations to protect its profit centers. The more rational assumption is that the pricing of futures has real consequences for global industry and agriculture and therefore does not deserve the same risk tolerances as for Dogecoin. And crypto liquidations seem to be a separate profit center. In addition, the FTX is committed to influencing its preferred election for the regulatory authority in the industry if the US government should ever follow suggestions to integrate crypto trading into a legislative structure.

blockchain is and will be largely irrelevant for the more general reasoning. FTX wants the legitimacy of regulated markets, while it uses the same centralized systems it developed in crypto to cook the frog and harvest the dead.

What FTX has to do now is to convince the participants that his preferred modernization mechanisms will not only promote retail gambling, manipulative volatility and arbitrary financialization. What is most urgently needed is a clear representation of the potential advantages, since the evidence from the core market is currently not great.