CFTC widens the route for passive trading interfaces, with liability shared by regulated partners

The CFTC’s Market Participants Division broadened its passive-software no-action position on 17 September, opening a conditional route beyond the developer-specific relief issued in March. Letter 26-25 covers introducing-broker and associated-person registration when qualifying software connects users with designated contract markets, futures commission merchants or introducing brokers. The opportunity is to distribute a regulated trading service through another firm’s interface.[1]

The March letter addressed Phantom Technologies, whose proposed interface could sit inside its wallet or operate separately. It contemplated revenue sharing with trading partners and transaction-based user charges, while the derivatives collateral remained with a clearing organisation or clearing member. That earlier letter was addressed to Phantom; September’s announcement broadens the staff position to qualifying providers.[3][1]

The conditions shape the partnership

Other conditions cover statutory disqualification, marketing controls, records and insolvency notification. The provider must file its compliance and jurisdictional consent. Relief runs until relevant Commission rulemaking or guidance takes effect; MPD can alter or withdraw it.[2]

For a regulated trading firm, the partnership therefore needs an economic return that justifies responsibility for another company’s conduct. A distribution agreement should give the partner a practical way to inspect releases, advertising and incident records. Paying for customer acquisition while having no visibility into the interface would make that bargain difficult to manage. This is an operational consequence of shared responsibility, rather than a separate contractual template prescribed by the letter.

Marketing remains part of the operating model

Rule 2-29 prohibits misleading promotions and requires risk discussion as prominent as profit claims. It also addresses performance presentation and review of promotional material. Its audio/video provision normally requires advance NFA approval when material makes specific trading recommendations or refers to the extent of past or potential profits.[5]

Letter 26-25 excludes promotions that would require such NFA pre-approval.[2]

That distinction affects how a software business sells its service. Demonstrating navigation, account information or the availability of a contract is a different product decision from generating a trade instruction. A feature roadmap should make the decision-maker visible: the customer chooses the transaction; the interface supplies the connection. Adding a signal engine or automated routing decision requires a fresh analysis of the regulatory basis, rather than an assumption that the original distribution arrangement covers the extension.

Evidence must survive the interface

The referenced recordkeeping rule includes electronic data needed to access, search or display records, as well as data describing their creation or modification. It requires authenticity, reliability and production capability, including during disruption. Most records outside specified categories have a five-year minimum retention period; separate rules apply to certain transaction records and required oral communications.[6]

In practice, a provider and its trading partner need to reconstruct what a customer saw, acknowledged and instructed. A current screenshot alone cannot establish the terms accepted under an earlier software version. Keeping the relevant disclosure, acknowledgement and release history together makes the boundary between the interface and the trading service more demonstrable.

No-action relief is a staff commitment not to recommend enforcement under specified provisions. It binds the issuing division within its stated scope, rather than changing the statute or binding the Commission. Commercial plans built around it therefore remain dependent on continued satisfaction of the letter’s conditions.[4]

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