CFTC/SEC Issue Joint Statement on Facilitating the Trading of Spot Crypto
Commentary by Andrew Lom
The SEC Division of Trading and Markets, the CFTC Division of Market Oversight and the Division of Clearing and Risk (the "Divisions") issued a joint statement expressing their intention to facilitate the trading of certain spot crypto asset products on CFTC- and SEC-registered markets.
The Divisions asserted that the law does not prohibit the trading of spot crypto on SEC-registered national securities exchanges, or on CFTC-registered designated contract markets (DCMs), or foreign boards of trade (FBOTs). The Divisions stated that leveraged, margined, or financed "retail commodity transactions" subject to the CEA must be effected on either a CFTC-registered platform or an SEC-registered national securities exchange.
The Divisions invited exchanges, clearing house, and market participants to put forward listing proposals. The Divisions promised to promptly review such listing proposals. The Divisions also said they would work with market participants in a wide variety of operational areas including trade settlement, market surveillance, public reporting of trading, and on providing investor protections.
Commentary
The crypto industry and retail market participants have been practically begging for this type of guidance. It opens the door for spot trading, on an exchange, ideally through a broker or custodian, and without the market participant needing much personal technical expertise with hot wallets or fearing that the exchange or trading activity will be deemed illegal. Spot trading is perhaps the simplest and most basic interaction a participant can have with crypto markets, and it should form the foundation for more sophisticated, potentially regulated, financial transactions involving crypto and digital assets.