Statement Summary
The Securities and Exchange Commission (SEC) Staff has released a statement addressing the affiliations between national securities exchanges and broker-dealer entities. This statement invites public input on these relationships in light of recent market developments and emerging product listings. Key provisions of the Exchange Act outline that national securities exchanges must enforce compliance among members and avoid unfair discrimination. Concerns regarding potential conflicts of interest in affiliations, particularly with broker-dealers that have operational advantages over other members, are highlighted. The Staff is also seeking comments from the public on these issues to supplement their understanding as regulations evolve, inviting submissions via email or paper to enhance transparency and compliance.
Original Statement
The Staff of the Division of Trading and Markets (“Staff”) of the Securities and Exchange Commission (“Commission”) is issuing the following statement regarding the affiliation between registered national securities exchanges and entities that engage in broker-dealer activities on those exchanges. This statement would also solicit public input regarding such affiliation, particularly in light of the growing market interest in listing novel products.
For further information, please contact the Staff by emailing TradingAndMarkets.
Section 6(b)(1) of the Exchange Act requires that a national securities exchange must be organized and have the capacity to enforce compliance by its members and persons associated with its members with the provisions of the Exchange Act, the rules and regulations thereunder, and the rules of the exchange.
Section 6(b)(5) of the Exchange Act mandates that the rules of a national securities exchange must not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
Section 6(b)(8) of the Exchange Act requires that the rules of a national securities exchange must not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act.
An exchange that trades securities futures products that notice-registers with the Commission under Section 6(g) of the Exchange Act is a national securities exchange and is subject to Sections 6(b)(1), (5), and (8) of the Exchange Act.
In light of changing market conditions, the Staff recognizes the potential questions market participants may have about a national securities exchange, including a notice-registered exchange, operating an affiliated broker-dealer, including a broker-dealer that acts as an introducing broker providing access to the exchange for others, provides custodial services and margin, or trades in a principal capacity on the exchange.
In approving certain affiliations between a registered national securities exchange and a broker-dealer, the Commission previously stated that “the financial interests of the national securities exchange may conflict with its responsibilities as an SRO regarding the affiliated broker-dealer.”
The Commission stated that a conflict of interest arises if the national securities exchange “provided advantages to its broker-dealer affiliate that are not available to other members or provided a feature to all members that was designed to give its broker dealer a special advantage,” including “greater access to information, improved speed of execution, or enhanced operational capabilities in dealing with the exchange.”
The Commission also stated that exchange affiliation with an introducing broker that accesses the exchange raises questions about whether the introducing broker should be considered a facility of the exchange.
The Commodity Futures Trading Commission recently issued a notice of proposed rulemaking concerning affiliations among certain CFTC-regulated entities. The proposal would, among other things, address disclosure requirements regarding affiliate relationships that a futures commission merchant (“FCM”) has with a designated contract market (“DCM”), and would establish requirements for DCMs, including conflicts of interest rules, to address their relationships with FCM affiliates and affiliated principal trading firms.
The Commission recently received four Form 1-Ns for notice registration as security futures product exchanges under Section 6(g) of the Exchange Act. Each of these registrants discloses in its Form 1-N that it is affiliated with an FCM that will perform introducing broker functions, extend margin to customers and hold client funds and property, and is a member of the exchange for purposes of trading security futures. None of these registrants disclose an affiliation with an entity that will trade security futures in a principal capacity. Certain of these registrants have filed proposed rule changes under Sections 19(b)(2) and 19(b)(7) of the Exchange Act seeking to establish margin and listing standards for products to be listed and traded on the security futures product exchange.
In light of these developments, the Staff invites comment from market participants regarding national securities exchange affiliations, including with entities that engage in broker activity on behalf of customers on the exchange or that trade in a principal capacity on the exchange.
Members of the public who wish to provide their views on this statement may submit their comments electronically or on paper. Please submit comments using one method only. Information that is submitted will be posted on the SEC’s website and all comments received will be posted without change. Persons submitting comments are cautioned that personal identifying information is not redacted or edited from comment submissions, and they should only submit information that they wish to make publicly available. All submissions should refer to File Number 4-936, and the file number should be included on the subject line if email is used.
Use the SEC’s online submission form or send an email to rule-comments with “File Number 4-936” included in the subject line. Send paper comments to Vanessa Countryman, Secretary, Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-1090.
This statement represents the views of the Staff. It is not a rule, regulation, guidance, or statement of the Commission, and the Commission has neither approved nor disapproved its content. This statement, like all staff statements, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.
See infra notes 10 and 11.
See 15 U.S.C. 78f(b)(1).
See 15 U.S.C. 78f(b)(5).
See 15 U.S.C. 78f(b)(8).
See 15 U.S.C. 78f(g)(4)(A)(i).
Securities Exchange Act Release No. 44983 (Oct. 25, 2001) 66 FR 55225, 55233 (Nov. 1, 2001).
See id. at 55234.
See 91 FR 50926 (Aug. 6, 2026).
See Securities Exchange Act Release Nos. 106295 (Sept. 8, 2026), 91 FR 57944 (Sept. 11, 2026) (Acknowledgement of Receipt of Notice of Registration as a National Securities Exchange Pursuant to Section 6(g) of the Securities Exchange Act of 1934 by Coinbase Derivatives, LLC); 106296 (Sept. 8, 2026), 91 FR 57947 (Sept. 11, 2026) (Acknowledgement of Receipt of Notice of Registration as a National Securities Exchange Pursuant to Section 6(g) of the Securities Exchange Act of 1934 by KalshiEX LLC); 106297 (Sept. 8, 2026), 91 FR 57949 (Sept. 11, 2026) (Acknowledgement of Receipt of Notice of Registration as a National Securities Exchange Pursuant to Section 6(g) of the Securities Exchange Act of 1934 by Bitnomial Exchange, LLC); 106396 (Sept. 16, 2026), 91 FR 59823 (Sept. 21, 2026) (Acknowledgement of Receipt of Notice of Registration as a National Securities Exchange Pursuant to Section 6(g) of the Securities Exchange Act of 1934 by North American Derivatives Exchange, Inc.).
