Popular cryptocurrency exchange FTX is expanding into the arena of traditional investing for retail customers in the United States.
In a new post, FTX US president Brett Harrison informs his 50,900 Twitter followers about the platform’s new feature which allows users in all 50 US states plus Puerto Rico and the Virgin Islands to buy and sell stocks as well as exchange-traded funds (ETFs).
“FTX Stocks is now live for US users!
Residents of all 50 states (yes, including NY!) as well as PR and USVI can sign up.
Trade hundreds of stocks and ETFs from both the web and the FTX US Pro mobile app.”
Harrison then responded to several questions, first specifying that the stocks offered were real and not synthetics, before also clarifying that customers who use the standard FTX app can expect to see the new trading feature functional within “a few days.”
The entrepreneur also appeared on CNBC to explain FTX’s reasoning behind offering traditional financial products at a time when many mainstream institutions are warming up to cryptocurrencies.
Harrison says of FTX’s approach regarding commissions,
“The biggest difference for us is we’re trying to use a model that doesn’t rely on payment for order flow. Obviously, a controversial practice that has resulted in much of the retail liquidity moving off of the public exchanges to private wholesalers.
We think that’s ultimately resulting in worse market quality for all participants over time, and we’re trying to reverse that trend as much as we can.”
Payment for order flow (PFOF) enables brokers to make money even while offering commission-free trading by sending retail customer orders to private market makers rather than a public exchange. Fractional profits are made on the price spreads between a customer’s initial bid and the stock’s actual selling price.
When asked how FTX intends to make money on stock trades, Harrison explains,
“Right now it’s free for all users. Starting in a month it’s going to continue to be free for all purchases under one share. One thing we learned from our private data is a surprising amount of flow results from fractional share buys, ones that are [less than] one share. High-price stocks like Tesla.
From there we’re going to be charging a commission on each trade, which is sort of going back to how things were in the old days. We think that’s going to result in much more transparent and fair and honest pricing while we continue to route these orders to public exchanges, rather than having to rely on private dealers or individual wholesalers where unregistered ETFs are being filled off of the exchange.”
Harrison says the basic fee structure will be 5 basis points, or 5/100ths of a percent, as well as 2 basis points in “fair amount” trades.
The CEO concludes by saying how cryptocurrency buyers have come to expect straightforward commission rates in their transactions and are therefore likely to embrace FTX’s model.
“Our users, especially on the crypto side, are used to this simple and honest and fair idea of charging a flat percentage of the trade notional value on each trade rather than having to think about whether the payment to order flow is deteriorating the quality of the NBBO [National Best Bid and Offer].
People are truly getting honest pricing.”
Back in May, it was reported that FTX had approached at least three stock trading startups regarding a possible acquisition.
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