FTX Full Story-2| Spot Markets FTX : Key Terms & Safety
FTX Full Story-1| FTX Exchange : What Does That Mean?
Key Terms Sold by FTX
Futures, leveraged tokens, options, MOVE and spot markets were among FTX’s most prominent offerings.
Futures:
With over a hundred different quarterly and perpetual futures pairings with margins of up to 101x, investors could place long and short bets on the market’s most popular cryptocurrencies. Deposits and withdrawals are secured with stable coinage like the US dollar (USD) and tether (USDT).
Put Tokens:
Traders on FTX might get leverage of up to three times the value of the underlying trading pair by purchasing tokens based on the ERC20 standard. If a trader buys a Bitcoin token and the price of Bitcoin rises 10% from the moment of purchase, the token’s value will increase by 30% because of the leverage. Margin wasn’t needed to trade FTX’s leveraged tokens.
Options:
Numerous call and put options provided the holder the right, but not the responsibility, to buy or sell at a future strike price, allowing traders to speculate on future price direction and hedge against current open positions.
Move:
These contracts were effectively a wager on volatility, allowing investors to gamble on how much the price of a cryptocurrency would fluctuate over a given time frame regardless of the direction in which it would move. The contract was profitable as long as the underlying cryptocurrency’s price fluctuated by more than a certain dollar amount, in either direction.
Spot Markets:
FTX provided access to the top cryptocurrencies through over a hundred distinct spot trading pairings, including Bitcoin, Ethereum, Binance Coin, Chainlink, and Ripple’s XRP.
Options contracts denominated in 0.01 Bitcoin and 0.1 Ether were available for trading on FTX US, along with cryptocurrency swaps and Bitcoin micro futures. It also served as a trading platform for tokens with limited utility.
To help traders take advantage of tiny price swings, FTX provided futures pairs for the biggest cryptocurrencies with margins of up to 101x.
FTX Rules and Regulations
After relocating from Hong Kong in September 2021, FTX established its headquarters in the Bahamas and registered as a company in Antigua & Barbuda. The Securities Commission of the Bahamas oversees FTX Digital Markets Ltd, one of its subsidiaries. No one from the United States can use the exchange’s services.
FTX US is a money services business (MSB) registered with FinCEN that provides services to crypto traders in the United States. After acquiring LedgerX in October 2021, FTX US renamed the exchange “FTX US Derivatives.” The U.S. Commodity Futures Trading Commission has issued FTX US Derivatives licences as a Derivatives Clearing Organization, Swap Execution Facility, and Designated Contract Market (CFTC).
Currency Exchange Rate Costs
Based on the maker and taker model, trading fees for the FTX competitive futures and spot markets were from 0.04% to 0.07% for market takers as of September 2022. Tokens that were leveraged had a daily management cost of 0.03% in addition to the 0.10% that was charged to create and redeem them.
Most cryptocurrencies could be deposited and withdrawn from the FTX without incurring any fees. Withdrawals of more than 0.01 BTC were always free, and so was the daily minimum withdrawal of less than 0.01 BTC. To withdraw a modest amount of bitcoin, a 0.1% fee was applied. There were 18 free withdrawals of Fiat currency for amounts over $5,000 USD, and one free withdrawal per week for amounts less than that.
As of September 2022, market taker trading costs on the FTX US exchange varied from 0.05% to 0.2%. Money could be deposited in fiat currency accounts through wire transfer, ACH, debit or credit card, and the Silvergate Exchange Network, and withdrawn in the same ways (with the exception of debit and credit cards). For withdrawals exceeding $5,000 USD, we waived the fee for using a wire transfer. Withdrawals below that amount were also permitted once per week without charge, but further wires would cost $25 each time. When making a deposit via the blockchain, there were no costs charged. Except for ERC20/ETH and micro-Bitcoin withdrawals, FTX US covered the associated blockchain fees.
Trading costs for NFTs differed based on the platform used and the location of the transaction. When using the self-service listing feature of FTX US, customers must pay $1 to list an NFT, and the seller must pay 2% of the sale price for each transaction. 21 On the other hand, FTX (the non-US platform) levied 5% transaction fees on both the buyer and seller.
Safeguards for FTX Transactions
Personal accounts, exchanges, and additional security measures were the three main areas where FTX excelled at risk management.
Protection of Individual Accounts
The company’s stringent character criteria for registering an FTX account made it difficult to choose a simple combination. Password requests were also checked for predictable patterns, and accounts that did not follow these guidelines were denied.
To provide more security, FTX demanded that its customers utilise a two-factor authentication system (2FA). All withdrawals needed to be verified using 2 factors of authentication. If the account’s password or 2FA contact details were altered, FTX would also prevent withdrawals.
FTX recorded and monitored user behaviour to look for irregularities. If FTX detects an unusual login attempt, it will alert the account holder for additional verification.
Guaranteed Safe-exchange in Dealings
Chainanalysis was hired by FTX to monitor trades for signs of potentially fraudulent behaviour. Chainanalysis is a real-time AML compliance system that checks for out-of-the-ordinary transactions and significant deposits.
To ensure that there are always liquid assets available to support trading, FTX additionally administered the FTX Backstop Liquidity Fund. FTX’s liquidity fund had a balance of around $200 million as of September 2022.
Additional Safety Measures
When it came to FTX, users were able to set up their own sub-accounts so that they could access the platform with their own unique credentials. Subaccounts permit numerous users to share a single account while still maintaining individual control over the access privileges granted to each. The level of access granted to each user can be changed to “read-only” (can not make any trades but can view historical activity). Additionally, withdrawal permissions can vary widely amongst accounts.
Users of FTX were also able to set security parameters related to IPs and wallet addresses. This restricts access to a particular account to authorized devices or IP addresses, preventing unauthorized use.