Cboe Digital President John Palmer issued a letter to customers today to outline its policies about asset safeguards.
Dear Crypto Community,
Recent events in the industry have led us to reach out to highlight our customer protection policies, the benefits of regulatory oversight, and the value of including intermediaries in our marketplace–which has been our position since inception.
To protect member funds and assets, Cboe Digital is obligated to completely segregate customer assets from our own assets by holding them at a bank in a specially-designated account, for the benefit of our Members, and separate from the operating funds of Cboe Digital. This is required by CFTC regulations for futures trading and clearing, and state requirements related to Money Service Business (MSB) licenses. Cboe Digital has strict policies in place to ensure our customer funds are segregated and safe.
Cboe Digital believes that regulatory oversight provides significant benefits to the industry with focus on, but not limited to, counterparty risk, financial health/solvency/resources, responsible innovation, system safeguards, and overall goal of providing a resilient and robust market for price discovery in any asset class, including cryptocurrencies. Given the frequent macro-level events the industry has endured, below is a table that highlights why this oversight is important and how Cboe Digital is solving for different types of risk the industry continues to face.
The letter also explained how Cboe approaches several possible risks of unregulated markets, among them counterparty risk and customer asset protection.
From the outset we have set out to bring best practices in risk, operation, trading, and trust from traditional markets to support intermediaries including Futures Commission Merchants (FCMs) and their customers in our marketplace. FCMs act as intermediaries between the customer and the exchange that actually executes the trade and the clearing house that clears the trade. We are committed to including retail and institutional intermediaries because they are positioned to provide specialized, tailored services and risk management. Traders and investors can leverage intermediaries’ tools for research and education, as well as idea implementation to reach financial goals.
Enabling access via intermediaries ensures that there are multiple points of risk and credit control, customer protection, separation of business function/duty, and management of conflicts of interest. Wecontinue to be focused on serving our intermediary partners by offering them a regulatory-first, trusted, transparent, purpose-built exchange and clearing house to provide their customers responsible access to cryptocurrencies and derivatives on cryptocurrencies.
Cboe Digital believes in responsible innovation and has built our transparent market within current Federal and state regulatory guidelines from the ground up to keep our members’ assets secure. We work with intermediaries to enhance the trading and investing experience. If you would like to read our full comment letter about the FTX proposal and caution on dis-intermediated access, you can find it here.
President, Cboe Digital