The Commodity Futures Trading Commission (CFTC) has issued a no-action position regarding Passive Software Providers (PSPs) that develop trading tools for derivative products. The regulator announced it will not pursue enforcement actions against such developers for failing to register as introducing brokers, provided they meet certain specified conditions.
The CFTC's Market Participants Division confirmed the position in response to a PSP enabling trading in Commission-regulated derivative products. The move provides regulatory clarity for developers working in the crypto derivatives space.
Conditions for Exemption
The CFTC outlined ten conditions under which crypto developers may operate without broker registration. Key requirements include:
- Developers must not be subject to statutory disqualification
- Users of the PSP's tools must be direct members or customers of Commission-regulated derivative exchanges and retain independent access to those exchanges without relying on the PSP
- PSPs cannot engage in advertising or promotions that would require pre-approval by the National Futures Association if they were registered as introducing brokers
- PSPs must file a notice with the CFTC Division agreeing to satisfy these conditions and consenting to the Commission's jurisdiction for investigations and enforcement
The no-action position remains in effect until the CFTC issues formal rulemaking or guidance addressing how introducing broker requirements apply to covered activities by such providers.
Broader Regulatory Context
The CFTC's announcement follows the SEC's release of an innovation exemption order for tokenized stocks, which grants five-year exemptive relief to venues offering these products subject to certain conditions. Both SEC Chair Paul Atkins and CFTC Chair Mike Selig have indicated their intent to provide continued regulatory clarity for the crypto industry.
