Crypto enthusiasts have been eagerly awaiting the launch of retail Bitcoin trading at investment giant TD Ameritrade. After all, with over $1.3 trillion under management and 11 million clients, any moves in the crypto market by this formidable firm could result in significant upward pressure on current prices. Twitter was on fire recently when one analyst unfortunately jumped the gun on a false report that TD was ready to open the doors wide, so to speak, but such was not the case.
To calm the waters a bit and inform the public as to TD Ameritrade’s present rollout plans, Tim Hockey, who tendered his resignation last week, chose to tell The Street in an interview that his company is pursuing a “crawl, walk, run approach”, regarding a broad-based offering of crypto products on its trading platform.
Hockey also added that:
Clients are asking for it. Our investment in ErisX at some point may allow us. But cryptocurrencies like bitcoin are drawing increasing interest from investors, and they want to trade it. Clients are asking for it.
TD Ameritrade was one of the early investors in ErisX, an exchange, which has “so far been given the go-ahead for futures”. As has been previously reported, the U.S. Commodity Futures Trading Commission (CFTC) has already given a license to ErisX to offer derivatives and futures contracts, made a bit easier since the firm already held a designated contract market (DCM) license.
Strangely enough, most all press accounts that have been keeping track of TD’s progress in the crypto arena have rarely mentioned that the firm is no stranger when it comes to offering crypto products to its clientele. A modest perusal of its website might not reveal a crypto offering, but the firm has offered “select” clients access to trading Bitcoin futures on the CME exchange. Per those in the know:
These derivatives tend to add complexity to Bitcoin trading since you’re typically not actually buying or selling cryptocurrency but rather a product based on the underlying price. They also tend to be settled in cash – not crypto.
What would it take to acquire such “select” status? If you would like to trade futures via TD Ameritrade’s platform, then you would need to deposit $25,000 in your account, a steep price for your typical retail crypto investor that is more comfortable in the 4-digit range. Futures contracts are viewed as more of an institutional product, since it is typically used to hedge other outstanding positions in the market. When the Bakkt exchange comes on stream shortly, it will settle physically “in kind”, such that one will need to deliver Bitcoins, not cash, on the settlement date, which could impact prices.
It is not surprising that such a large firm with a substantial reputation to protect might be extra cautious before opening any “flood gates” to the public for crypto participation. The Facebook/Libra hearings raised a specter of fear across the industry, although many observers have asserted that Bitcoin is not Libra, or anything like it.
TD Ameritrade does offer a few major forex trading pairs, but it is not a full- fledged forex broker, nor does it want to be. To offer crypto pairs, however, would necessitate regulatory approval, and, as Mati Greenspan, senior analyst at eToro, explains, volatility remains a material issue:
Bitcoin volatility remains high, making it a very attractive option to speculators. But it also increases the risks dramatically.
And so, we remain waiting in anticipation, as to when TD Ameritrade will begin taking larger steps and offer retail crypto trading to its full audience of clients. Large publicly traded entities like TD Ameritrade, as a rule, tend to move extra slowly when approaching risk. Hockey concludes:
There is a lot of regulatory scrutiny, whether it be for Libra or crypto generally. We would like to be able to participate, but we want to be comfortable with the risk to our clients and ourselves in a world where crypto has still got lots of debate about a number of items that we’re all hearing about.