Exactly. We seem set on "progress" but forget the impacts it has on the average trader/hedger. We always forget about the hedger here who does not possess the experience nor speed of the average computer. I would say be careful what you ask for especially around the FTX proposal.
There is a lot to chew on in your comment but let me hit a few topics. Full disclosure here, I worked for FCM's and the CME in my tenure in Chicago.
1. I agree that the FTX model is a bit looney to think 30 second margin calls improve the futures biz. In the eyes of FTX this tends to reduce exposure on a crypto that moves has large price swings and making those calls will be a pain to FTX in the present model. Take for example a grain farmer in Iowa who has a credit line with his bank to pay margin calls, buy seeds, gas, tractors. Imagine having this farmers account dinged every 30 seconds for margins. He would have to maintain more cash in the account which adds to his costs in raising the product. Lets not even touch on the "big brother" grabbing money from the account without him/her knowing about it.
2. FCM's do add that buffer for the exchanges when errors/deficits/etc happen. After working at the CME I can tell you they have no human talent on staff right now that could handle this biz so you are correct to say that staffing up would be great....possibly competing with FCM's for that talent. FCM's also have that group of GIB's/trading advisors/etc that add value to the chain. I envision the CME being a discount broker type of operation if this goes through.
3. I agree CME doing this is preparation in case the CFTC approves FTX plan. Agree again that you never underestimate CME when it wants to compete....known Terry too long and have seen it happen several times anyone got into the CME space.
Honestly, I think change is typically good for the futures biz. The trading floors were due to find competition from the screen and the screen won. I rode that curve with my clients and benefited from it with better and more timely fills. But this change from FTX is not a benefit to the client. It only helps the exchange reduce risk....which they charge for that now.
Efficiency tends to win that’s a big part of the FTX model. FCMs add friction, cost, for what can mostly be automated away. Is it a perfect solution? Likely not but the discussion was long overdue.
Exactly. We seem set on "progress" but forget the impacts it has on the average trader/hedger. We always forget about the hedger here who does not possess the experience nor speed of the average computer. I would say be careful what you ask for especially around the FTX proposal.
There is a lot to chew on in your comment but let me hit a few topics. Full disclosure here, I worked for FCM's and the CME in my tenure in Chicago.
1. I agree that the FTX model is a bit looney to think 30 second margin calls improve the futures biz. In the eyes of FTX this tends to reduce exposure on a crypto that moves has large price swings and making those calls will be a pain to FTX in the present model. Take for example a grain farmer in Iowa who has a credit line with his bank to pay margin calls, buy seeds, gas, tractors. Imagine having this farmers account dinged every 30 seconds for margins. He would have to maintain more cash in the account which adds to his costs in raising the product. Lets not even touch on the "big brother" grabbing money from the account without him/her knowing about it.
2. FCM's do add that buffer for the exchanges when errors/deficits/etc happen. After working at the CME I can tell you they have no human talent on staff right now that could handle this biz so you are correct to say that staffing up would be great....possibly competing with FCM's for that talent. FCM's also have that group of GIB's/trading advisors/etc that add value to the chain. I envision the CME being a discount broker type of operation if this goes through.
3. I agree CME doing this is preparation in case the CFTC approves FTX plan. Agree again that you never underestimate CME when it wants to compete....known Terry too long and have seen it happen several times anyone got into the CME space.
Honestly, I think change is typically good for the futures biz. The trading floors were due to find competition from the screen and the screen won. I rode that curve with my clients and benefited from it with better and more timely fills. But this change from FTX is not a benefit to the client. It only helps the exchange reduce risk....which they charge for that now.
Tony
Efficiency tends to win that’s a big part of the FTX model. FCMs add friction, cost, for what can mostly be automated away. Is it a perfect solution? Likely not but the discussion was long overdue.