FTX’s collapse demonstrated the wisdom of segregating the activities of market making on the one hand (Alameda) from those of running an exchange (FTX) and a custodian (FTX again) on the other. However, the question of whether to segregate the activities of operating an exchange and a custodian is more nuanced. Large banks often run their trading businesses and their custody businesses in the same legal entity, using information walls to control for conflicts of interest and ensuring that their own assets are segregated from those of their clients. This paper will use the experience of the US grain industry in the late nineteenth century to illustrate the importance of controlling the…

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