FTX US is the first platform that offers equities to US customers. FTX US announced Wednesday that select customers will now be able to trade stocks and ETFs. This makes it the first crypto exchange in the US to offer equities.
The company has been teasing about the new product for several months. It is called FTX stocks and allows users to fund their accounts using the USDC stablecoin, as well as bank transfer.
FTX Stocks are currently only available to a select few customers from a waitlist. However, the company plans to make it available to all customers by mid-summer.
FTX claims that the offering will include “no fee brokerage accounts [and] Commission-less Trading” and fractional shares. There will also be no minimum account balance required to trade.
Robinhood is a pioneer in stock-trading and has been expanding its crypto offerings.
These similarities are particularly notable considering that Sam Bankman-Fried is the parent company of FTX US. He recently revealed that he purchased nearly 8% Robinhood shares. This raises rumors about a possible merger or acquisition.
In an interview with Decrypt, FTX US President Brett Harrison said that Robinhood’s investment was “passive”, but also praised the company for offering crypto and stocks. This could suggest that FTX’s long-term interest is not passive.
FTX US claims that the new stock offering won’t, at least not for now, earn the company any money from the so-called payment flow optimization (PFOF) which has been a key part of Robinhood’s business model over the past two years.
PFOF is a method of bundling customer orders and routing them to Citadel Securities. Citadel Securities executes the orders and charges a fee. Some argue that the practice benefits small traders because it allows them to benefit from bulk order pricing. However, critics view PFOF as unfair or sneaky.
PFOF is out of the picture for now, as Harrison states that FTX US does not intend to profit from the Stocks feature. He said that it would be a complement to the company’s primary crypto offerings and help to retain and attract customers.
It is unclear how much of a boost FTX US will receive from the addition of stocks. The company is competing in a market dominated largely by Coinbase and Kraken. Bloomberg reported in November that FTX’s crypto marketshare was at 4.5%. This growth is likely due to the aggressive marketing efforts of the company, which include putting its logo on every Major League Baseball umpire.
FTX US claims that it has grown to 1.2 Million customers since the beginning of 2022 from approximately 10,000 at the beginning of the previous year.
FTX US’s stock offering could face challenges despite its rapid growth. If Robinhood is any indication, it may be a precedent. Robinhood’s share prices have plummeted over the past year due to the collapse of meme stock trading. Market watchers are now questioning whether the business, which is aimed at small-cap investors with no experience, will continue to be viable long-term.
Harris seemed unaffected by Robinhood’s recent problems. He stated that the U.S. is still the largest global investment market and that people will continue buying stocks, ETFs, and crypto, even in bad markets. He stated that FTX US’s goal was to provide a long-term platform with a wide range of assets and a user-friendly interface.