Coinbase (NASDAQ:COIN) has acquired FairX, a Chicago-based, Commodity Futures Trading Commission (CFTC ) regulated derivatives exchange.
In a blog post, Coinbase described the acquisition as the next step towards creating a “robust and holistic trading environment investors are seeking.”
Coinbase currently operates under a hodge-podge of state regulatory regimes to provide crypto investing and other services. FairFX is regulated at the federal level.
Coinbase said they plan to bring regulated crypto derivatives to market while leveraging FairX’s infrastructure to offer crypto derivatives to all Coinbase customers in the US.
“Deep and liquid derivatives markets are essential to the functioning of traditional capital markets. These products are in high demand from investors who seek to effectively manage risk, execute complex trading strategies, and gain exposure to crypto outside of existing spot markets. The development of a transparent derivatives market is a critical inflection point for any asset class and we believe it will unlock further participation in the cryptoeconomy for retail and institutional investors alike.
FairX brings a world-class team with deep expertise across product development, market structure, and compliance to Coinbase. Its market-leading exchange technology and proven ability to deliver listed futures in a straightforward, easy-to-understand structure, aligns with Coinbase’s commitment to creating a more fair, accessible, efficient, and transparent financial system enabled by crypto.”
In the highly volatile crypto market, derivative trading is active both in the institutional and retail side. Crypto derivatives can allow traders to hedge and speculate with greater leverage.
Coinbase said the acquisition is subject to customary closing conditions with the anticipation the deal will be complete at some point during the first quarter.
Of note, is the fact that certain regulators have bemoaned the lack of federal oversight of crypto exchanges. Purchasing FairX will firmly bring crypto derivatives under the management of Coinbase under a federal regime.