FTX US, the cryptocurrency exchange co-founded by Sam Bankman-Fried, is expanding into equities trading as it seeks a cushion for when digital assets retreat while capturing a broader group of retail investors.
Select users will be able to trade hundreds of US-listed stocks and ETFs with no fees, FTX US said Thursday in a statement. Retail traders can opt to fund their brokerage accounts with asset-backed stablecoins such as USD Coin, in addition to using wire transfers and credit card deposits.
The move can help diversify the exchange’s business when crypto markets takes a downturn, FTX US President Brett Harrison said in an interview. “It’s beneficial for us to have stocks on the platform even if it’s not a profit source for us on Day One,” he said.
The Bloomberg Galaxy Crypto Index has declined more than 60% since early November. The TerraUSD stablecoin and its related digital coin Luna lost almost all their value this month. The implosion will have a long-term negative impact on how the cryptocurrency market is perceived, especially when it comes to stablecoins, Harrison said.
“This laid bare the fact that people were using the term stablecoins to mean very, very different things,” Harrison said Wednesday during a panel discussion at Bloomberg Intelligence’s Market Structure 3.0 conference.
FTX US said its stock orders will initially be routed through Nasdaq Inc., the second-largest domestic stock exchange, and won’t take “payment for order flow,” a controversial practice where market makers pay brokers to execute their retail orders.
The firm has hinted at a move into stock trading in recent months, as part of its expansion strategy. It has also proposed a way to trade crypto derivatives by removing intermediaries, rattling some long-time participants on Wall Street.
Last week, Bankman-Fried revealed a 7.6% stake in Robinhood Markets Inc. He has said he intends to hold the stock as an investment and not to influence the company for now.
That disclosure and FTX’s move into stocks come at a critical time for Robinhood, whose shares have plunged by more than 70% since the firm went public last July. As the meme stock trading phenomenon loses steam, crypto has become a key growth driver for Robinhood, making up an increasing portion of its revenue.
“We recognize that crypto is the higher-margin business and it’s also our specialty,” Harrison said. “We’d like to see to what extent is stocks a missing piece for us in terms of attracting customers.”
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