The Commodity Futures Trading Commission (CFTC) recently announced several new staff letters and public statements with material consequences for legal and business professionals in the derivatives markets. In this alert, we set out a high-level summary of the most recent letters and statements.
CFTC Letter No. 25-22 (Advisory, July 18, 2025): Withdrawal of Staff Advisory 23-06 regarding prime brokerage arrangement and DCO registration
The CFTC’s Division of Clearing and Risk (DCR) withdrew CFTC Staff Advisory 23-06, which had provided CFTC staff guidance on when certain prime brokerage arrangements might trigger a requirement to register as a derivatives clearing organization (DCO) under the Commodity Exchange Act (CEA).
In the letter, DCR encouraged market participants to contact CFTC staff with questions regarding the potential need to register as a DCO, potentially indicating a case-by-case facts and circumstances approach when determining whether registration as a DCO is required.
CFTC Letter No. 25-23 (No-Action, July 22, 2025): Reporting and Recordkeeping Relief for Certain Event Contracts
The CFTC’s Division of Market Oversight (DMO) and DCR granted Chicago Mercantile Exchange Inc. (CME), a registered DCO, and its participants no-action relief from certain swap data reporting and recordkeeping requirements for certain binary option contracts traded and cleared pursuant to CME rules.
In its request to the CFTC, CME represented that these binary option contracts are similar to other exchange-listed products, as they are standardized, fungible, and centrally traded, and they would be subject to premium-style margining. CME also stated that the risk profile and margining of these binary options would not pose systemic risk. The CME noted that its request for no-action relief was comparable to other no-action relief previously provided by CFTC staff with respect to the reporting of similar contracts.
DMO and DCR decided to provide no-action relief consistent with CME’s request, but conditioned it on CME requiring full margining, clearing the binary option contracts through its DCO, publishing the time and sales data, providing transactional information to the CFTC, continuing to comply with reporting and recordkeeping requirements not covered by the no-action relief, and maintaining records that are open to inspection.
The CFTC staff specifically noted that the no-action position was limited to the specified reporting and recordkeeping regulations and did not constitute a legal conclusion regarding the characteristics of the binary option contracts or the conduct of any person covered by the no-action position.
CFTC Letter No. 25-24 (No-Action, July 30, 2025): Relief from SEF Minimum Trading Functionality Requirement
DMO issued no-action relief to swap execution facilities (SEF), specifically LSEG FX SEF, from the minimum trading functionality requirement under CFTC Regulation 37.3(a)(2) with respect to swap transactions that are not subject to the trade execution requirements of Section 2(h)(8) of the Commodity Exchange Act. Under the minimum trading functionality requirement, SEFs are required to offer an order book for all listed swaps. The intended purpose of this requirement was to promote pre-trade price transparency and shift liquidity onto SEFs.
In its request to the CFTC, LSEG FX SEF argued that order books are rarely used for these types of swap transactions and maintaining them imposes significant costs without improving transparency or shifting liquidity onto SEFs.
The DMO decided to provide no-action relief consistent with LSEG FX SEF’s request until such time as the CFTC addresses the application of the minimum trading requirements with respect to the above-mentioned swap transactions.
CFTC Letter No. 25-25 (No-Action, July 31, 2025): Swap Data Error Correction Notification Relief
DMO granted no-action relief to reporting counterparties from the requirement to submit swap data error correction notifications under certain swaps reporting rules.
This no-action position covers a reporting counterparty that fails to submit a swap data error correction notification with respect to an error in its reported swap data if, at the time the reporting counterparty initially discovers and assesses the impact of an error, the reporting counterparty makes a reasonable determination that the number of reportable trades affected by the error does not exceed 5% of the reporting counterparty’s open swaps for the relevant asset class in swaps for which it was the reporting counterparty. This threshold should be calculated by the reporting counterparty as part of the verification process required under the applicable swap reporting rules.
The no-action position will expire upon the compliance date of any CFTC action addressing the applicable swap error correction notification provisions, which may include a rulemaking or order.
CFTC Letter No. 25-26 (No-Action, August 7, 2025): Reporting and Recordkeeping Relief for Certain Event Contracts
DMO and DCR granted no-action relief to Railbird Exchange, LLC (a registered DCM) and QC Clearing LLC (a registered DCO) and their participants from certain swap data reporting and recordkeeping requirements for certain binary option contracts and variable payout contracts traded and cleared pursuant to their rules.
This no-action relief is conditioned on full collateralization, exclusive clearing through QC Clearing LLC, prompt publication of transaction data, compliance with other applicable reporting requirements (except for those that are the subject of the no-action relief), and maintenance of records open to inspection.
The CFTC staff specifically noted that the no-action position was limited to the specified reporting and recordkeeping regulations and did not constitute a legal conclusion regarding the characteristics of the binary option contracts or the conduct of any person covered by the no-action position.
This no-action relief is similar to that provided in CFTC Letter 25-23, see above.
CFTC Acting Chairman Pham Launches Listed Spot Crypto Trading Initiative (Press Release No. 9105-25, August 4, 2025)
The CFTC’s Acting Chairman, Caroline D. Pham, announced a CFTC initiative to enable trading of spot crypto asset contracts that are listed on DCMs. This initiative is part of the CFTC’s "crypto sprint" to implement recommendations from the White House Crypto Report.
The CFTC invited public input on regulatory clarity for listing spot crypto asset contracts on DCMs. The initiative seeks feedback on how to list spot crypto contracts using the CFTC’s current authority and whether there are implications for the SEC’s framework for non-security assets that are part of investment contracts.
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