Cryptocurrency exchange FTX is launching stock trading capabilities for its customers through its U.S. division. The company, helmed by co-founder and billionaire Sam Bankman-Fried, said in an announcement that its launch will start in private beta mode for a select group of customers chosen from a waitlist before a full rollout in late 2022.
FTX, which is the second-largest crypto exchange in the world, says it will offer “hundreds of US exchange-listed securities, including common stocks and ETFs,” including fractional shares in certain securities.
Notably, FTX plans to route all orders through Nasdaq rather than a third-party market maker. The exchange says it will not receive payment for order flow (PFOF), a method for order fulfillment Robinhood became notorious for that involves the exchange receiving payment from market makers for directing orders their way. It’s a controversial way of clearing trades because it often means the investor doesn’t receive their shares at the best possible price, since the market maker profits from the spread.
Robinhood continues to employ PFOF because it can bring in substantial revenue from the third-party market makers. FTX, in contrast, will be foregoing profits from its stock trading offering because it is offering the service to users with no fee or commission charged in exchange.
FTX also says it will allow users to fund their brokerage accounts on the platform with fiat-backed stablecoins such as USDC (these are different from algorithmic stablecoins like Terra (UST), which are backed by other cryptocurrencies and don’t hold reserves in the traditional sense). The exchange says it will be the first to offer this capability, though users can also fund their accounts by standard means through wire transfers, ACH transfers, and credit card deposits.
FTX also won’t require customers to hold any minimum balance in order to qualify for the no-fee account, it said.
The announcement marks a pivotal moment in Bankman-Fried’s vision to expand FTX from an institutionally-focused platform with deep trading roots to an exchange that serves the broad range of needs of retail investors. Bankman-Fried revealed in a filing last week that he had bought shares in Robinhood worth 7.6% of the company, which could mark another move towards that end.
“What we eventually want to offer is an everything app for financial services,” Brett Harrison, FTX.US’s president, told the Wall Street Journal in an interview.