FAQs for Tokenised Derivatives

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Disclaimers

  1. Tokenised derivatives are total return swaps (over-the-counter (OTC) derivatives). Each tokenised derivative has a specific underlying instrument which can be a specific share, an exchange traded product (ETP), or futures contract (Tokenised Derivative).
  2. FTX Australia Pty Ltd (FTX Australia) is licensed to issue, make a market and deal in derivatives. FTX Australia offers Tokenised Derivatives to its clients and hedges 100% of client trades with FTX Switzerland. 
  3. Clients of FTX Australia do not acquire any claim to delivery of the underlying asset or rights attaching to that asset, such as dividends or voting rights. Tokenised Derivatives offered by FTX Australia are not transferable. You must close your position by selling it back to FTX Australia.
  4. The following FAQs constitute general information only and do not constitute a recommendation or financial advice. We recommend that you obtain independent advice before trading Tokenised Derivatives to ensure they are appropriate for your specific objectives, financial situation, needs and circumstances. 
  5. Before trading Tokenised Derivatives, you should also read FTX Australia’s Terms of Service, including the Terms and Conditions and Risk Disclosures for Tokenised Derivatives in Annexure A (the Terms). By trading Tokenised Derivatives, you agree that you have read, understood and accept the Terms as well as the Product Disclosure Statement (PDS), Financial Services Guide, Target Market Determination and Privacy Policy located here.
  6. Any quote for Tokenised Derivatives by FTX Australia is to be construed as an invitation to make an offer by you. We declare the acceptance of your offer by filling the offer accordingly. The price at which you trade may be subject to slippage and different from the price at which the underlying instrument trades on the primary listing exchange or different exchanges where the underlying instrument trades on more than one exchange. 
  7. Details of our trading fees are set out in the PDS.
  8. This FAQ is current as at 10 September 2022. It may become out of date at some point and/or fail to reflect updated policies.
  9. FTX Australia reserves the right to restrict trading of Tokenised Derivatives as it sees fit.
  10.  Tokenised Derivatives offered by FTX Australia are available to clients of FTX Australia only. Non-Australian users may register and trade tokenised products with other FTX entities. Information on location restrictions can be found here.

What are Tokenised Derivatives?

Equities are stocks that trade on traditional regulated exchanges. ETPs and futures also trade on traditional regulated exchanges. FTX Australia offers tokens which reference stocks, ETPs and futures as the underlying instrument (i.e. Tokenised Derivatives). 

Tokenised Derivatives track the price of an underlying instrument. You can buy and sell Tokenised Derivatives in a similar way in which you can trade the underlying instrument in spot markets. However, as Tokenised Derivatives are OTC derivatives, you will not have any claim to delivery of the underlying asset or rights attaching to that asset, such as dividend or voting rights in the case of stocks. 

Tokenised Derivatives also involve a number of risks which mean that trading Tokenised Derivatives is not comparable to trading the underlying instrument. Before trading Tokenised Derivatives, you should read FTX Australia’s Terms, including the Terms and Conditions and Risk Disclosures for Tokenised Derivatives in Annexure A, the PDS, Financial Services Guide, Target Market Determination and Privacy Policy located here.

 

How is trading of Tokenised Derivatives regulated?

FTX Australia is an Australian Financial Services Licensee No. 323193 permitted to issue, make a market and deal in derivatives in Australia. Tokenised Derivatives are total return swaps (OTC derivatives). FTX Australia does not custody the underlying equities, ETPs or futures. FTX Australia hedges 100% of its trades with FTX Switzerland. FTX Switzerland custodies equities at a third party brokerage firm. Australian users trade Tokenised Derivatives as OTC derivatives and have no recourse to underlying assets custodied by FTX Switzerland.

 

What Tokenised Derivatives are traded on FTX?

FTX Australia currently lists tokens which reference equities, ETPs and futures as the underlying instrument.  For instance, ftx.com/trade/TSLA/USD is a market to trade OTC derivatives which reference Tesla stock as the underlying instrument. You can buy and sell tokenised Tesla stock in a similar way to trading the underlying instrument. However, as Tokenised Derivatives trade as OTC derivatives, trading tokenised Tesla stock involves different risks which are not comparable to trading the underlying instrument and you do not have any claim to delivery of the Tesla stock or rights attaching to that asset, such as dividends or voting rights. Further details of the risks of trading Tokenised Derivatives is found in the Risk Disclosure for Tokenised Derivatives in FTX Australia’s Terms of Service which is located here. You should read the Risk Disclosure in full before trading Tokenised Derivatives.

 

Who can trade Tokenised Derivatives on FTX?

Clients of FTX Australia are required to complete its KYC and compliance processes and also become clients of FTX Trading Limited and/or its successors or assigns. Before you can trade Tokenised Derivatives, FTX Australia administers a client suitability assessment which contains questions assessing its clients’ understanding and experience of trading in derivatives and leveraged products.

Australian users are encouraged to obtain independent advice before trading Tokenised Derivatives to ensure they are appropriate for your specific objectives, financial situation, needs and circumstances. 

You do not need to register with FTX Switzerland.

 

How do you trade Tokenised Derivatives on FTX?

You can trade Tokenised Derivatives in a similar way to trading spot markets. By purchasing Tokenised Derivatives, you do not acquire the underlying instrument. Tokenised Derivatives can only be acquired with Digital Assets and are not transferable. You must close your position by selling it back to FTX Australia. You cannot withdraw Tokenised Derivatives to a third party digital wallet or close an open position through another exchange or OTC derivative provider.

Further details of our fees are contained in the PDS

 

How are corporate actions handled?

In its discretion, FTX Australia may pursue reasonable actions to have the tokens reflect corporate actions of the underlying instrument such as stock splits. However, as Tokenised Derivatives are OTC derivatives and you do not have any claim to the underlying asset, you will not receive dividends and have no entitlement to exercise voting rights in relation to the underlying asset.

 

What hours do Tokenised Derivatives trade on FTX?

FTX Australia offers Tokenised Derivatives on a 24/7 basis. As the liquidity of the underlying instruments may vary over the course of the day and week (e.g. where the market on which the underlying instrument trades is closed), this may impact the liquidity of FTX's markets.  

 

Can Tokenised Derivatives be used as collateral on FTX?

Tokenised Derivatives can be used as collateral for trading. Details of the collateral weight for Tokenised Derivatives can be found here

 

Note that Tokenised Derivatives can be highly volatile and illiquid, especially when their primary listing exchange is closed.  Please exercise your judgement and caution when trading Tokenised Derivatives.  Any risk that you take in your trades is your responsibility to manage.  You might be liquidated if you do not retain sufficient collateral to support margin requirements.

 

Clients of FTX Australia should read the PDS, the Terms of Service (including the Terms and Conditions and Risk Disclosure for Tokenised Derivatives), Target Market Determination, and our Financial Services Guide in their entirety before making any decision to trade Tokenised Derivatives. Copies are available here.

 

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