CFTC Staff Grants Relief from Reporting Requirements on Binary Options

The CFTC Division of Market Oversight ("DMO") and Division of Clearing and Risk ("DCR") issued a no-action letter granting a DCM/DCO relief from specific swap data reporting and recordkeeping requirements regarding trading "binary options on the outcomes of various economic or commercial events." In the no-action letter, the Divisions noted that the DCM requested the relief on "cash-settled binary options on cryptocurrencies," but "expects to offer other types of binary options in the future" (at fn. 6).

Under the no-action letter, the CFTC will not pursue enforcement action against the DCM or its participants for failure to comply with reporting requirements under CFTC Rules 38.8(b) ("Listing of swaps on a designated contract market"), 38.10 ("Reporting of swaps traded on a designated contract market"), 39.20(b)(2) ("Recordkeeping") and certain provisions under CFTC Rule 38.951 ("Additional sources for compliance"), as well as Parts 43 ("Real-Time Public Reporting") and 45 ("Swap Data Recordkeeping and Reporting Requirements"). 

The DCM is still required to fully collateralize all contracts, clear them through its own platform, and publicly disclose transactional data, including trade timestamp, contract quantity, and price. Additionally, the DCM must retain records and provide them upon request to the CFTC or other regulatory bodies.