CFTC Eases Regulatory Burden on Passive Software Providers

The Commodity Futures Trading Commission (CFTC) has issued a no-action position that allows passive software providers to skip broker registration. The relief, which was announced on September 17th, extends regulatory relief to technology vendors whose software helps users trade CFTC-regulated derivatives.

The distinction between 'passive' and 'active' software is crucial in this context. Passive software can route orders, display market data, and provide the plumbing that lets a user interact with regulated exchanges. However, it cannot hold custody of assets, generate buy or sell signals, or make any trading decisions on a user's behalf.

This relief has significant implications for the development of 'super apps' - platforms that bundle wallet functionality with direct access to regulated derivatives markets. Crypto wallet providers can now build interfaces and connect users to registered intermediaries without becoming introducing brokers themselves.