CFTC staff broadens registration relief for passive derivatives-trading software providers

What changed

CFTC Market Participants Division staff extended to all qualifying passive software providers a conditional no-action position previously available only to Phantom Technologies. Until Commission rulemaking or guidance addressing introducing-broker registration for software developers becomes effective, staff will not recommend enforcement for failure to register as an introducing broker or associated person solely because a provider offers and markets passive front-end software through which users submit orders directly to registered intermediaries or designated contract markets. Covered interfaces may support event contracts, perpetual contracts, and other CFTC-regulated derivatives and may be embedded in wallet software, but providers must satisfy detailed disclosure, marketing, recordkeeping, notice, supervision, joint-liability, noncustody, and non-discretion conditions. The letter represents staff views and is not binding on the Commission.

Who it affects

• Self-custodial wallet developers adding access to CFTC-regulated derivatives
• Other passive software providers connecting users with DCMs, FCMs, or introducing brokers
• Registered intermediaries contracting with passive trading-interface providers
• Advisers evaluating client access through wallet-integrated derivatives interfaces

What is still open

• When the CFTC will adopt rulemaking or guidance that ends or replaces the no-action position
• How staff will apply the covered-activity and passive-functionality limits to specific interface designs
• Whether a particular provider's marketing, compensation, routing, or other conduct crosses into registrable introducing-broker activity
• How registered intermediaries and software providers will allocate supervision and joint-liability responsibilities in practice

What it means for an advisor

• Confirm that any wallet-integrated or passive derivatives interface relied upon by clients has filed the required notice and satisfies every condition of Letter 26-25
• Review whether the provider holds assets, generates trading signals, exercises routing discretion, or performs other functions outside the relief
• Evaluate the registered DCM, FCM, or introducing broker relationship and the interface's conflicts, risk disclosures, marketing controls, records, and business-continuity arrangements
• Do not describe staff no-action relief as Commission approval or as eliminating other registration, fiduciary, commodity-interest, custody, or disclosure obligations