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FTX U.S. has announced the launch of a zero-commission stock trading platform, FTX Stocks, on Thursday, which was made available to a small number of U.S. users.
This announcement comes a week after the company’s owner, Sam Bankman-Fried announced his minority ownership stake in Robinhood. According to the SEC filing, Bankman-Fried took a 7.6% stake in Robinhood Markets, purchasing over 56 million shares for $648 million.
Combining stock and crypto trading
The U.S. affiliate of FTX also shared that it will be offering no-fee brokerage accounts, commission-less trading, free market data, and company fundamental data to onboard new investors to its platform – while attracting existing users from its crypto arm.
The exchange will initially route orders through Nasdaq, according to FTX U.S. President Brett Harrison, despite any money lost at the beginning stages.
“Our goal is to offer a holistic investing service for our customers across all asset classes. With the launch of FTX Stocks, we have created a single integrated platform for retail investors to easily trade crypto, NFTs, and traditional stock offerings through a transparent and intuitive user interface,” Harrison explained.
Harrison refers to FTX Stocks as a “customer acquisition play,” which will initially route orders to the Nasdaq through its clearing firm, Embed. He says that while FTX U.S. may initially lose money on stock trades, the exchange hopes to recoup those losses in other ways, including through its crypto trading service and white labeling its brokerage service to other brokers and financial services providers.
“If they want to invest in stocks, they’re not going to want to have to split their savings between two different apps, or have to move money around between two different accounts,” Harrison told CNBC’s “Crypto World” Thursday.
“They’d like to be able to have one holistic experience where they can invest in multiple asset classes from a single app and experience. That’s what we’re hoping to provide by combining stocks and crypto into the same application for our user.”
The FTX announcement also comes at a time when the crypto market is experiencing a slowdown, and new-age competitors like Robinhood are already providing stock trading options to their users. Currently, the S&P 500 as been playing with the edge of a bear market, with Nasdaq Composite suffering what CNBC calls “the worst month in April” since 2008.
Blockchain Association Executive Director Kristin Smith told Bloomberg earlier this year that blockchain is a valuable technology for trading cryptocurrencies and upgrading the infrastructure for doing the trading of traditional assets would result in the intertwining of crypto and stock trading.
Diversifying revenue by offering more assets
Q1 2022 had several exchanges recording lower volumes throughout this prolonged crypto winter, leading to relatively lower revenues.
For instance, only 24% of the trade volume on Coinbase came from retail clients, as per the exchange’s financial results for the first quarter. Additionally, Coinbase has warned of lower volumes in Q2 on top of weak Q1 numbers.
As the crypto market struggles to sustain its recovery, exchanges might also be looking at diversifying their revenue stream by exploring traditional asset offerings. FTX U.S. hopes that through FTX Stocks, it can provide more options to its existing customers with its stock offerings, while also being able to sustain a lull period.
“There is clear market demand for a new retail investment experience that offers full order routing transparency to customers and does not rely on payment for order flow. As we grow the product offering and capabilities, we are excited to give our customers even greater choice for order execution, as well as the tools they need to make informed routing decisions,” Harrison added.
The platform is currently open to select U.S. investors from its waitlist.
Bitstamp USA next?
Earlier this week, Bitstamp named JB Graftieaux as its CEO, who now replaces Julian Sawyer. Having joined Bitstamp in May 2021, Graftieaux previously served as the company’s CEO of its European business, as well as the company’s chief compliance officer from 2014 to 2016.
Bitstamp, founded in 2011, is the fourth largest crypto exchange by 24-hour trading volume, according to data by CryptoCompare.
Recently, the company launched its own crypto-as-a-service product, which it says is reportedly looking to expand into the stock trading vertical. This would place Bitstamp alongside competitors FTX U.S., Robinhood, and SoFi.
However, the SEC has yet to acknowledge the regulatory repercussions of offering traditional and virtual assets on the same platform. As an overall company, Graftieaux still think it’s early, acknowledging the growth the space has seen, but say’s something bigger is coming.