SEC outlines SEC-CFTC harmonization agenda for trading, tokenized securities and 23-by-5 markets

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SEC-CFTC harmonization agenda

Highlights

SEC's Division of Trading and Markets is developing a joint SEC-CFTC framework for tokenized securities and plans shift to 23-by-5 equity market operations by year-end.
SEC and CFTC are jointly reviewing areas like swap data reporting and product definitions, with public input sought to clarify and align overlapping rules.
Unresolved regulatory treatment of perpetual futures, especially for digital assets, remains under debate after CFTC's approval for Kalshi to trade Bitcoin perpetuals as futures contracts.

Regulatory priorities and harmonization focus

As reported by the Securities and Exchange Commission, Jamie Selway, director of the Division of Trading and Markets, says the agency is working under Chairman Atkins on a framework to list and trade tokenized securities, coordination with the CFTC on overlapping rules, a transition to 23-by-5 equity market operations by the end of this year, and recommendations to modernize rules including Reg NMS and the Consolidated Audit Trail.

Selway says effective harmonization should improve efficiency and flexibility for registrants and lower barriers to innovation. He points to parallel SEC and CFTC reviews of new products, including CME's application for an exemption to trade single-stock futures with cash, P.M. settlement, and the SEC's approval on May 22 of Nasdaq PHLX's proposal to list and trade cash-settled Bitcoin index options.

The division has identified swap and security-based swap data reporting, portfolio margining and product definitions as initial areas where the two rulebooks may lack clarity or compatibility. Selway calls for public input from market participants, clients and counterparties to help align rules and reduce regulatory frictions.

Digital asset products and investor safeguards

Selway says one unresolved issue is the legal status of perpetual futures, products that are widely used outside the U.S. regulatory perimeter, especially in digital assets. He notes that expert views remain divided on whether such instruments should be treated as futures contracts or swaps under current law, while the CFTC's recent approval of Kalshi's proposal to trade Bitcoin perpetuals as a futures contract suggests further industry debate is likely in the coming months.

He also warns that harmonization will not be simple because of intense market competition and high commercial stakes. In his remarks, Selway says the process will require patience and long-term thinking from firms and investors, adding that venue shopping and unrealistic expectations could weaken the effort.

Selway frames the broader policy goal around investor protection, saying regulators and market participants must distinguish investing from gambling and avoid excessive leverage for unsophisticated customers. He says successful harmonization should support genuine innovation while protecting the investing public across U.S. capital markets.

Our earlier coverage of AI-enabled cybersecurity risks in the U.S. financial sector highlighted Senator Elizabeth Warren’s call for the Treasury to strengthen banks’ cyber resilience as advanced AI tools increase vulnerability to attacks. The article emphasized proposals for tougher supervision, stronger third-party vendor oversight, and improved threat information-sharing, arguing that cyber and operational risk controls should remain a core part of financial oversight even as policy debates continue over deregulation and innovation.

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