FTX Direct Clearing Plan Was Nowhere Close to Being Approved, CFTC Chief Says

The U.S. Commodity Futures Trading Commission was nowhere close to making a decision on a controversial FTX plan to streamline financial market structure rules, which were proposed before the crypto exchange went bust, CFTC Chairman Rostin Behnam said Monday.

In March, FTX’s U.S. arm proposed to merge traditionally separate roles of trading and clearing in directly settling certain crypto derivatives contracts, but the empire of then-CEO Sam Bankman-Fried now lies in tatters after CoinDesk revealed an unusually tight relationship between FTX and its trading arm, Alameda Research.

“There are elements of the application that I think have merit, but ultimately we didn't come up with a decision,” Behnam said at an event in London hosted by the Financial Times. “We were actually not even close, because there were more questions,” he added, citing issues of law, policy and risk.

FTX said it wanted to allow customers to assess and respond to derivatives risks in real time, but withdrew its plans on the same day it filed for bankruptcy, Nov. 11. In October, Behnam, after pushback from the traditional-financial sector, called the idea “unique” and potentially another phase in financial market innovation.

Behnam defended the close contacts between FTX staff and his own officials as they discussed the ideas.

“FTX and its management team came in quite frequently,” Behnam said. “As the chairman of the agency, I wanted to be squarely involved to make sure that I was seeing what was happening in terms of the process,” with all parties able to participate, he said.

“We at the CFTC had a legal responsibility to respond to the application,” he said. “We can't just rubber-stamp yes or no, we have to have a legal basis. It has to be anchored in the law.”

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