Nasdaq-listed cryptocurrency exchange Coinbase is aiming to make derivative market approachable to millions of retail customers as it acquires Fairx Exchange
The acquisition is implemented as Coinbase Plans to Offer Crypto Derivatives to All US Customers
Last Wednesday, Coinbase announced that it has acquired Fairx, a regulated derivatives trading platform.
Fairx is regulated by the Commodity Futures Trading Commission (CFTC) as a derivatives exchange or Designated Contract Market (DCM).
According to Coinbase, they plan to bring regulated crypto derivatives to market, initially through Fairx’s existing partner ecosystem. Further, they added that they are planning to through Fairx’s existing partner ecosystem.
“This is the most important stepping stone for us to help a derivatives market come to form. We think the U.S.-listed derivative market presents a very substantial commercial opportunity.”
Brett Tejpail, Head of Coinbase Institutional
How exactly the Futures exchange, FairX going to help Coinbase?
Coinbase has been working to expand into derivatives for months. In September, last year, Coinbase filed an application with the National Futures Association to register as a futures commission merchant. The process is still in operation. Adding to that, last year, it also bought Skew, to track derivatives.
Now Futures exchange, FairX, based in Chicago, offers an advantage to Coinbase in a way to accelerate the process. One reason is that it is already comes under the regulation of Commodity Futures Trading Commission.
Also, it offers margin trading, which is key to attracting investors. Further, it provides its products through established brokers like TD Ameritrade and E*Trade Financial. Coinbase likely hopes that some of these financial companies will eventually offer its crypto derivatives in the coming days. Although it doesn’t have formal agreements with them.
Coinbase’s stand on the recent aquisition
According to Coinbase, Deep and liquid derivatives markets are essential to the functioning of traditional capital markets.
‘These products are in high demand from investors who seek to effectively manage risk, execute complex trading strategies, and gain exposure to crypto outside of existing spot markets.’ – Coinbase states.
The acquisition of Fairx is subject to customary closing conditions and reviews. Coinbase expects the deal with FairX to close in the first fiscal quarter. In the meantime, Fairx will operate normally until the deal is complete.
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