CFTC Chair Details Plan to "Future Proof" Derivatives Markets
At an address before the Futures Industry Association, CFTC Chair Michael S. Selig described plans to "'future-proof' derivatives markets" by reducing regulatory burdens, embracing digital asset innovation, and defending prediction markets.
On traditional markets, the Chair said he directed staff to "[r]evive the Agricultural Advisory Committee," "[r]educe duplicative compliance burdens" for firms "registered with both the CFTC and SEC," and explore amendments to "capital, margin, and reporting rules." He also called for exploring more frequent publication of the Commitment of Traders report and "enhanc[ed] cross-margining for agriculture and energy participants."
On digital assets, he said the CFTC was working with the SEC on Project Crypto, aimed at producing a clear taxonomy of crypto assets and resolving longstanding jurisdictional questions between the two agencies. He said he directed staff to issue guidance on whether "developers of non-custodial software" and DeFi applications "trigger CFTC registration requirements," and to clarify rules governing leveraged retail crypto transactions and crypto-perpetual contracts.
On regulatory reform, Mr. Selig announced a pilot program to exclude energy end-user swaps from the swap dealer de minimis threshold, with potential extensions to "agricultural and critical minerals swaps." He said he directed staff to replace a patchwork of no-action letters with formal rulemakings on swap reporting, and to reinstate the QEP Exemption for sophisticated investor pools. He reported that the CFTC and SEC will also jointly revise Form PF to reduce data collection burdens.
On prediction markets, Mr. Selig said that he directed staff to "draft guidance [on] how event contracts may be listed and traded," and announced an "advanced notice of proposed rulemaking" to solicit public feedback on the space.
Mr. Selig also described his intention to dismantle the agency's climate risk apparatus by disavowing the 2020 MRAC Climate Risk Report, eliminating the Climate-Related Market Risk Subcommittee, shuttering the Climate Risk Unit, and withdrawing the agency's 2022 Request for Information on climate-related financial risk. The Division of Enforcement, he said, will refocus on "fraud, abuse, and manipulation" rather than policy-setting.