Citadel Warns of Regulatory Gaps in Event Contracts and Perpetual Derivatives

Citadel Securities has filed a comment letter with the SEC and CFTC urging them to keep event contracts and perpetual derivatives tied to public companies under SEC oversight.

The market maker argues that trading venues are using the CFTC's faster approval process to sidestep securities rules, which could lead to novel insider-trading risks.

Citadel points out that key performance indicator contracts, whose payouts depend on whether a company hits a specific metric, are being self-certified by some CFTC-registered designated contract markets without public comment or SEC approval.

The firm believes these contracts should be considered security-based swaps and fall under SEC authority, rather than the CFTC's jurisdiction. Citadel also warns that equity-linked perpetual derivatives could push trading activity outside the SEC's existing surveillance and investor-protection framework.