CFTC Gives Software Developers Green Light for Passive Derivatives Trading
The U.S. Commodity Futures Trading Commission (CFTC) has clarified its stance on software developers building passive derivatives trading platforms, including those used in crypto markets.
In a Staff Letter 26-25 issued on September 17, the CFTC's Market Participants Division announced that it will not pursue enforcement against developers who are not registered as introducing brokers, provided they meet certain conditions.
This relief expands on an earlier approach used by the CFTC in March with Staff Letter 26-09, which applied specifically to a provider of self-custodial crypto wallet software. The new letter makes similar relief generally available to qualifying providers of passive software.
The distinction between providing passive technology and actively acting as an intermediary is crucial. Software developers can build platforms that help users discover, route, or initiate derivatives transactions with registered venues without automatically becoming introducing brokers. However, once a provider moves beyond passive software into solicitation, discretionary execution, custody, or other broker-like functions, separate registration obligations may still apply.