FTX enters TradFi; launches stock trading services in the US
The exchange will offer no-fee brokerage accounts, commission-free trading, and market and company data to a select group of US users
By Shashank Bhardwaj
Crypto exchange FTX is reportedly launching zero-commission stock trading features for its customers. According to FTX, currently the world's second-largest cryptocurrency exchange, it would sell "hundreds of US exchange-listed securities, including common stocks and ETFs."
On Thursday, May 19, the company announced that it would offer no-fee brokerage accounts, commission-free trading, and market and company data. For the time being, the new service is only available to a small number of people in the United States.
Instead of using a third-party market maker, FTX intends to route all orders through Nasdaq. The company also claims it will not be paid for order flow due to increasing retail concerns about transparency and fairness in order routing.
“If they want to invest in stocks, they’re not going to want to have to split their savings between two different apps, or have to move money around between two different accounts,” FTX US President Brett Harrison told CNBC. “They’d like to be able to have one holistic experience where they can invest in multiple asset classes from a single app and experience. That’s what we’re hoping to provide by combining stocks and crypto into the same application for our user,” he added.
Users will be able to fund their brokerage accounts on the site using fiat-backed stablecoins such as USDC rather than algorithmic stablecoins such as Terra (UST), which are backed by other cryptocurrencies but do not retain reserves in the traditional sense.
Though the exchange is likely to lose money on stock trades initially, it aims to recover those losses with other services such as crypto-trading and the sale of its basic crypto services to other brokers and financial service companies. “To start, this isn’t going to be a profitable endeavor for us,” Harrison remarked. “Our goal is to be able to add this additional service for our customers to help bolster our existing business.”
The announcement comes at a critical juncture in CEO and Founder Bankman-Fried's vision to transform FTX from an institutionally focused platform to one that can serve a diverse array of retail investor needs.
Shashank is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash