Hide Not Slide

CME housed its own FX market maker for years that traded against its own customers & was kept completely separate from the rest of the exchange. They quietly shuttered it a few years ago, but they weren't forced to. The CFTC didn't say it was illegal.

The only issue I have with an exchange + MM combination is data sharing. An exchange can see 100% of the activity on its market, and a MM can't. If FTX is sharing all its data with Alameda, that's an unfair & unethical advantage. But do we know if this the case?

As long as FTX & Alameda aren't sharing any data between each other I honestly don't see a huge issue with their exchange/MM relationship. Am I missing anything with this angle?

The last angle is the MM-broker tie up. We also have a precedent here in the US equities world - PFOF/broker internalization of retail flow. If Robinhood wants to & is allowed to internalize its own flow, isn't that effectively a MM-broker tie up? Is that unethical?

To conclude, I think as the structure currently stands the FTX - Alameda - Blockfolio tie up is not perfect. There is room for unethical behavior to appear. BUT - if best ex & data sharing rules are put in place, the unethical behavior in theory can't happen... right? Right?

The question here is - what's the line between vertical integration (all chains of order flow/liquidity provision under one roof to cut costs) and shady activity (extracting more money from customers & hindering competition)? The line is thin. Where is FTX on the line?