Citadel Securities is pressing the SEC and the CFTC to preserve the SEC’s oversight of equity-linked products in the face of new event contracts and perpetual derivatives.
The firm said in a Sept. 9 comment letter that innovation should not weaken the regulatory framework governing US securities markets. It argued that equity options and security-based swaps are already covered by federal securities laws and that products linked to US public companies should remain within the SEC’s regulatory and surveillance system.
Citadel Securities raised concerns about the CFTC’s self-certification process, which allows registered trading venues to certify that new products comply with applicable rules and potentially begin trading the following business day.
By comparison, SEC-regulated venues generally face a formal review process that includes public comment and affirmative SEC approval.
Citadel Securities also warned that trading venues could rely on the CFTC’s self-certification process to sidestep SEC jurisdiction. The firm argued that KPI contracts are security-based swaps, making them subject to the SEC’s regulatory authority.
The firm separately raised concerns over equity-linked perpetual derivatives, saying they could push trading activity outside the SEC’s existing surveillance and investor-protection framework.
Citadel Securities urged both agencies to reaffirm SEC jurisdiction over equity-linked products, prevent self-certification from being used to circumvent that jurisdiction and promptly clarify the regulatory treatment of event contracts and perpetual derivatives.
