CFTC approves KPI-linked swap listing for designated contract market

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CFTC approves KPI swap listing

Highlights

CFTC approved under Regulation 40.3 the listing of a cash-settled KPI-linked binary outcome swap contract for trading on a designated contract market.
The order applies solely to KPI contracts traded as swaps on DCMs and does not extend to similarly structured products that fall outside CFTC-approved frameworks.
CFTC and SEC signaled harmonized regulatory oversight for KPI-linked contracts, aiming to remove barriers and support innovation and participant choice in financial markets.

Approval scope for KPI contract

As reported by Commodity Futures Trading Commission, citing the Commodity Futures Trading Commission, the approval comes under Commission Regulation 40.3 after the agency voted to allow the designated contract market, or DCM, to list the product for trading.

The order describes the KPI contract as a cash-settled binary outcome contract structured as a swap under the Commodity Exchange Act. The contract is listed and traded on a DCM and remains subject to protections under the Commodity Exchange Act and the Commission's regulations, including DCM core principles.

The Commission says the order is limited to the listing and trading of the KPI contract, and other KPI event contracts discussed in the submission, when they are structured to trade on a DCM in compliance with the law and CFTC rules. It does not address similar products based on the same underlying KPIs if they are structured differently.

Regulatory coordination and market implications

The approval does not rule out Securities and Exchange Commission jurisdiction over KPI contracts tied to the same underlying indicators when those products are structured to fall under SEC oversight. The statement notes that the SEC recognized that distinction in its own approval order issued earlier this month.

The decision is presented as part of broader coordination between the CFTC and SEC after years of jurisdictional disputes that, in the Commission's view, have slowed innovation and left some financial products unrealized. The agency says the CFTC order, together with the SEC's action, supports harmonization, innovation and greater market participant choice by removing obstacles to the lawful introduction of new financial instruments.

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