Coinbase to acquire FairX for CFTC-regulated derivatives trading

Rick Steves

The exchange operator has recently welcomed Charles Schwab Futures, Forex LLC, and E*TRADE to its list of partners, which includes Hudson River, Virtu Financial, XTX Markets, Tradovate, Ironbeam, Stage 5, EdgeClear, Bookmap, CQG, Rithmic, Sierra Chart, TradingView, and dxFeed.

Coinbase has announced the acquisition of FairX, a CFTC-regulated derivatives exchange or Designated Contract Market, as part of its strategy of developing a holistic trading environment for investors, including a regulated crypto derivatives to market.

The digital asset trading platform for retail and institutional customers will go down the derivatives trading road initially through FairX’s existing partner ecosystem and, over time, by leveraging FairX’s infrastructure to offer crypto derivatives to all Coinbase customers in the United States.

A well-regulated derivatives market is part of a maturing asset class, which brings Coinbase to FairX in order to make the derivatives market more approachable for millions of retail customers registered with Coinbase.

FairX signed top brokerages as partners

Coinbase is being advised O’Melveny & Myers while FairX tapped DLA Piper in order to make the acquisition deal go smoothly, although the companies did not disclose how much the deal is worth.

Since launching in June, FairX has seen volume consistently reaching new highs, with ADV growing 33% week-over-week. The exchange operator has recently welcomed Charles Schwab Futures, Forex LLC, and E*TRADE to its list of broker partners, which opens up distribution to a very large number of global clients.

Earlier in 2021, Hudson River Trading joined Virtu Financial and XTX Markets as a market maker and liquidity provider for FairX, thus strengthening the stream of quotes for the exchange’s listed products.

The distribution network of retail-focused brokers and vendors offering access to FairX futures also includes Tradovate, Ironbeam, Stage 5, EdgeClear, Bookmap, CQG, Rithmic, Sierra Chart, TradingView, and dxFeed.

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FairX caters to retail traders

Retail traders are generally considered as cannon fodder for institutions and larger traders at the big exchanges and it is interesting that FairX proposes to be an exchange for such a class of traders.

The idea is to create a futures exchange that will be smaller and simpler for active retail traders who may feel left out or swamped at the major futures exchanges that are dominated by the big players.

The exchange started with a list of products that includes futures on the Bloomberg US Large Cap Index, an index that tracks the largest 500 companies by market cap, the Bloomberg US Dollar Spot Index, which tracks the value of the U.S. dollar against a basket of international currencies, as well as the SuperTech Index, tracking 15 of the largest and most actively traded companies engaged in technology, media, and manufacturing industries.

FairX will bring a team with deep expertise across product development, market structure, and compliance to Coinbase, once the deal is completed in Coinbase’s first fiscal quarter. FairX will operate normally during this period.

The futures exchange’s straightforward approach and structure aligns with Coinbase’s commitment to creating a more fair, accessible, efficient, and transparent financial system enabled by crypto, the crypto exchange said.

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