Cryptocurrency exchange FTX is launching stock trading opportunities for its clients through its US division. The company, led by co-founder and billionaire Sam Bankman-Fried, said in an announcement that it will launch in private beta mode for a select group of customers chosen from a waiting list before fully rolling out at the end of 2022.
FTX, the world’s second largest crypto exchange, says it will offer “hundreds of U.S. publicly traded securities, including common stocks and ETFs,” including fractional shares in certain securities.
In particular, FTX plans to route all orders through Nasdaq rather than a third-party market maker. The exchange says it will not receive payment for order flow (PFOF)Robinhood became infamous because the exchange receives payments from market makers to forward orders their way. It is a controversial way of clearing trades as it often means that the investor is not getting their shares at the best possible price as the market maker is profiting from the spread.
Robinhood will continue to employ PFOF as it can bring significant revenue from the outside market makers. FTX, on the other hand, waives profits from its stock trading offering because it offers the service to users without charging any fee or commission in return.
FTX also says it will allow users to fund their brokerage accounts on the platform with fiat-backed stablecoins such as USDC (these differ from algorithmic stablecoins such as Terra (UST), which are backed by other cryptocurrencies and hold no reserves in the traditional sense). The exchange says it will be the first to offer this capability, although users will also be able to fund their accounts by default through wire transfers, ACH transfers, and credit card deposits.
FTX also does not require customers to have a minimum balance to qualify for the free account, it said.
The announcement marks a pivotal moment in Bankman-Fried’s vision to expand FTX from an institutionally focused platform with deep trading roots to one that serves the broad range of needs of retail investors. Bankman-Fried revealed in a filing last week that he had purchased shares in Robinhood worth 7.6% of the company, which could represent another step toward that goal.
“Ultimately, what we want to offer is a financial services everything app,” Brett Harrison, president of FTX.US, told the Wall Street Journal in an interview.