Coinbase outlines the path ahead for its planned derivatives offering

Quick Take

  • Coinbase is moving forward with its plans for a crypto derivatives business in the US. 
  • The exchange giant’s plans were on display during a futures industry conference in Boca Raton, Florida, on Tuesday. 

Coinbase revealed new details about its planned derivatives business during an event in Florida on Tuesday.

The presentation at FIA Boca, a futures industry conference, came months after Coinbase announced its planned acquisition of FairX, a CFTC-regulated derivatives exchange.

Appearing before the audience of traditional finance professionals were Vishal Gupta, Coinbase’s head of exchange, and Neal Brady, FairX’s co-founder and now a senior product director at Coinbase.

Brady is also leading the rebranded FairX, now known as Coinbase Derivatives.

During the presentation, the company outlined the three major aspects of its derivatives business.

The first is its planned futures commission merchant, dubbed Coinbase FCM. Last fall, Coinbase applied for membership in the National Futures Association, the premier US self-regulatory organization for such businesses. Coinbase’s membership is still pending, per the NFA’s website.

The second is Coinbase DCM, which is where the now-rebranded FairX’s registration with the Commodity Futures Trading Commission (CFTC) comes into play. In its presentation, Coinbase pitched an “[a]dvanced, low latency trading platform” and “connectivity to major retail brokers and market makers.”

Last is Nodal Clear, a derivatives clearing organization that functions as a third party to the offering and is owned by Deutsche Börse Group. In November 2020, Nodal Clear was granted approval by the CFTC to clear contracts for other DCMs.

Looking ahead, Coinbase said in its presentation that it is moving to onboard brokers, market makers and other FCMs to its platform as well as working with the CFTC on its planned offering. Coinbase is also “developing new crypto futures products to serve the needs of institutional and retail end users,” per the presentation.

According to a source with knowledge of the roadmap, FairX – now Coinbase Derivatives – will continue to operate and launch crypto derivatives for its clients directly. A broader launch of derivatives for Coinbase’s userbase is pending regulatory approval.

Tuesday’s developments perhaps add new fuel to the budding marketplace for crypto derivatives in the US, with FTX.US seeking a path of its own. As reported last week, the firm’s proposal to offer crypto derivatives trading is now subject to a CFTC public comment period. FTX recently debuted a new institutional-focused business unit called FTX Access.

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