Bankman-fried Supports Knowledge Tests For Retail Derivatives Traders “One Hundred Percent.”

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Last Updated on October 17, 2022 by Bitfinsider

Sam Bankman-Fried, the founder and CEO of cryptocurrency exchange FTX, has expressed support for the concept of knowledge tests and disclosures as a means of providing protection for retail investors. However, he has stated that these safeguards should not be limited to the cryptocurrency industry alone.

In response to a suggestion made by Christy Goldsmith Romero, commissioner of the United States Commodities Future Trading Commission (CFTC), on October 15, Bankman-Fried tweeted his thoughts, saying that the establishment of a “household retail investor” category for derivatives trading could give greater consumer protections.

Romero stated that due to cryptocurrencies, more retail investors are entering the derivatives markets. He called for the CFTC to separate these investors from professional and high-net-worth individuals and to have “disclosures written in a way that regular people understand or could be used when weighing rules on the use of leverage.” Romero also called for the CFTC to have “disclosures written in a way that regular people understand or could be used when weighing rules on the use of leverage.”

When traders speculate on the future price of an asset, such as a stock, commodity, fiat currency, or cryptocurrency, they are engaging in derivatives trading. This type of speculation involves the buying and selling of derivative contracts, which may involve the use of leverage.

The founder of FTX stated that he is “100%” in agreement with the idea of mandating disclosures and knowledge tests for all Future Commissions Merchants (FCMs) and Designated Contract Markets (DCMs) who deal with retail traders, and he added that the idea “could make sense.”

However, he suggested that the disclosures and tests should be applicable to all derivative products, saying that it does not “necessarily make sense” for them to be specific to cryptocurrencies.

DCMs are a type of derivative exchange that is regulated by the CFTC and on which products like options and futures are offered. The only way to access these products is through an FCM, which is a broker that accepts or solicits buy and sell orders from customers regarding futures or futures options contracts.

The comments made by Bankman-Fried come as an FTX.

According to Bankman-Fried, FTX US, which is FTX’s United States-based entity, is planning to launch cryptocurrency derivatives trading, and the exchange has already developed a knowledge test that could be used for its platform.

As demands for regulatory clarity become more consistent, the Commodity Futures Trading Commission (CFTC) is stepping up its efforts to become the regulator of choice for the cryptocurrency market in the United States.

The Commodity Futures Trading Commission (CFTC) Commissioner Caroline Pham stated on September 27 that the regulatory body ought to establish a crypto retail investor-focused office in order to extend its consumer protections. The structure of the proposed office would be based on that of an existing office run by the Securities and Exchange Commission (SEC) (SEC).


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Disclaimer: The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, legal, tax or other advice. Investing in or trading cryptocurrency or stocks comes with a risk of financial loss.

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