CFTC and SEC Request Comment to Clarify Jurisdiction Over Swaps

The CFTC and the SEC requested comment on ways to draw clearer jurisdictional lines on innovative products that may blur "the regulatory interests of both agencies" and to explore "potential approaches to enable alternative compliance."

The agencies explained that "new trading models, digital infrastructure, and onchain, automated systems are increasingly blurring traditional jurisdictional lines." (See prior coverage). The agencies said they are working to coordinate efforts "to reduce regulatory gaps and provide greater certainty regarding regulatory responsibility."

On issues of regulatory clarity, the agencies requested comment on current definitions under CEA Title VII as they apply to new instruments like event contracts, which blur the lines between swaps, security-based swaps, and traditional securities. They said they are seeking principled, objective criteria to determine which regulatory regime applies. Further, the agencies posed questions around the SBS event contract prongs, security forwards, perpetual contracts, and binary options which, they said, all highlight how difficult it has become to fit modern products into statutory definitions written before many of these structures existed.

On alternative compliance, rather than requiring market participants to satisfy duplicative regulatory obligations across both frameworks, the Commissions requested comment on whether compliance with one agency's rules could satisfy substantially similar requirements of the other. They asked about how to define "substantially similar," how to handle surveillance and enforcement across regimes, and how to prevent gaps in market integrity protection from emerging at the seams between the two agencies' jurisdictions.