Citadel Securities has formally requested that the SEC and the CFTC ensure that all equity-linked products remain under the oversight of the Securities and Exchange Commission. The firm submitted a comment letter on September 9, arguing that current federal securities laws must continue to govern products linked to public companies.
The company expressed concern regarding the CFTC's self-certification process, which permits trading venues to launch new products as early as the next business day. Citadel Securities warned that this mechanism could be utilized to bypass the more rigorous SEC review process, which typically requires public comment and formal approval.
Specifically, the firm identified KPI contracts as security-based swaps that should fall under SEC jurisdiction. Additionally, Citadel Securities highlighted risks associated with equity-linked perpetual derivatives, noting that such instruments could shift trading activity outside of established investor-protection and surveillance frameworks.
The firm is urging both regulatory agencies to clarify the boundaries between swaps and security-based swaps. This initiative follows the rapid expansion of prediction markets, which has prompted regulators to re-evaluate the oversight of new event-based financial instruments.
