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In brief
FTX Stocks will let users fund their accounts with USDC.
Customers will be able to buy stocks and ETFs within the crypto app.
The offering is being rolled out to select customers from a waitlist.
FTX US announced on Wednesday that select customers can now trade stocks and ETFs, making it the first native crypto exchange to offer equities within its platform.
The new product, which the company has been teasing for months, is called FTX Stocks and will let users fund their accounts with the USDC stablecoin as well as bank transfers.
For now, FTX Stocks will be available to a small number of customers selected from a waitlist, but the company expects to roll it out to all users by mid-summer.
FTX says the offering will include “no-fee brokerage accounts [and] commission-less trading” as well as fractional shares, and that it will require no minimum account balance to trade.
Such offerings bring to mind Robinhood, which pioneered many of those features in the stock-trading world and has also been expanding its crypto offerings.
The similarities are especially notable given that the owner of FTX US’s parent company Sam Bankman-Fried, recently disclosed that he acquired nearly 8% of Robinhood’s shares—touching off rumors that a merger or acquisition may be in the works.
In an interview with Decrypt, FTX US President Brett Harrison described the Robinhood investment as “passive” but also praised the company’s success at offering both crypto and stocks, perhaps implying that FTX’s interest will not be passive over the longer term.
Meanwhile, FTX US also says that its new stock offering will not—for now at least—earn the company money from so-called payment for order flow (PFOF), which has been a cornerstone of Robinhood’s business model in the last two years.
PFOF involves bundling customer orders together and then routing them to a third-party market maker like Citadel Securities, which executes the orders and pays a fee for doing so. While some argue the practice helps small traders by letting them benefit from bulk order pricing, critics portray PFOF as sneaky or unfair.
In any case, PFOF appears off the table for now as Harrison says FTX US is not currently seeking to make the Stocks feature turn a profit. Instead, he said it will serve as a complement to the company’s primary crypto offerings, while helping to attract and retain customers.
It remains to be seen how much of a boost the addition of stocks will deliver to FTX US, which is trying to compete in a market dominated by the likes of Coinbase and Kraken. In November, Bloomberg reported that FTX US’s crypto marketshare had grown to 4.5%—growth likely spurred by the company’s aggressive marketing efforts, which have included putting its logo on every umpire in Major League Baseball.
At the start of 2022, FTX US says it had grown to 1.2 million customers from around 10,000 at the start of the previous year.
Despite this rapid growth, FTX US’s new stock offering may face headwinds if Robinhood provides any precedent. In the last year, the decline of meme stock trading has led Robinhood’s share price to crumble and led market watchers to question whether its business—aimed at novice investors with small accounts—is viable in the long term.
Harris appeared to be unfazed by Robinhood’s recent troubles, however, stating that the U.S. remains the largest investment market in the world, and noting that people will continue to buy stocks, ETFs and crypto even in a bad market. Given this, he said, FTX US’s goal is to create a platform for the long term that will offer both diverse assets and a superior user interface.
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