Innovation And Market Structure: Keynote Address By CFTC Acting Chairman Caroline D. Pham, Piper Sandler Global Exchange And Trading Conference 2025

Thank you for the invitation to speak at the Piper Sandler Global Exchange and Trading Conference.[1]  I’m honored to be asked to provide the keynote address here today during a time of rapid innovation and transformation of market structure—both in new products and new markets.

When I became acting Chairman this year, I said we have to get back to basics. For the past half century, the CFTC has proudly served our mission to promote market integrity and liquidity in U.S. derivatives markets—markets that are critical to the real economy and global trade—ensuring American farmers, producers, merchants and other commercial end-users can mitigate risks to their business and support strong U.S. economic growth.  You—this audience in this room—are the leaders of those markets who ensure that they are deep, liquid, and well-functioning each and every day.  Our markets work best because there is a partnership between the regulator and our self-regulatory organizations (SROs): National Futures Association (NFA) and CFTC-registered designated contract markets (DCMs), derivatives clearing organizations (DCOs), and swap execution facilities (SEFs) for the derivatives markets, and Financial Industry Regulatory Association (FINRA) and SEC-registered national securities exchanges and clearing agencies.

Today, I will discuss how the CFTC is promoting regulatory policy that supports U.S. economic growth and American competition, and approaching innovation and market structure.  First, I will highlight the CFTC’s regulatory agenda that was submitted pursuant to the President’s executive orders.  Next, I will discuss the work of our operating divisions and questions about the self-certification process for new or changed contracts or rules. Finally, I will share some observations on the CFTC’s recent requests for comment on 24/7 trading and perpetual derivatives, and direct access and non-intermediated clearing.

Unified Regulatory Agenda 

I am pleased to announce the CFTC has submitted its 2025 Spring Unified Regulatory Agenda and will highlight a few items.  In accordance with Executive Order 13771, Reducing Regulation and Controlling Regulatory Costs,[2] I have identified the following rulemaking initiatives to provide regulatory certainty, eliminate unnecessary cost burdens, and unleash a golden age for markets:

• Improving the SEF “Made Available to Trade” (MAT) process for swaps

• Expanding access to markets for insured depository institutions by broadening the scope of products excluded from the swap dealer de minimis threshold calculation 

• Expanding access to markets by no longer requiring associated person registration for personnel of introducing brokers that only refer swaps to a wholly owned affiliate de minimis dealer

• Codifying foreign exchange product interpretation that window FX forwards and package spot FX transactions are not FX swaps 

• Codifying no-action relief from both the pre-trade mid-market mark disclosure requirement and certain documentation requirements for cleared swaps and prime brokerage transactions for swap dealers 

• Codifying no-action relief from the clearing requirement for legacy swaps resulting from multilateral portfolio compression exercises 

• Codifying no-action relief from ownership and control reporting under Parts 17, 18, and 20 of CFTC regulations

• Codifying no-action relief for DCMs and DCOs from duplicative reporting of fully collateralized binary options to swap data repositories (SDRs) under Parts 43 and 45 of CFTC regulations 

• Sunsetting duplicative and burdensome Part 20 large trader reporting obligations for physical commodity swaps, as required under Regulation 20.9 

• Eliminating the burdensome and costly cotton-on-call reporting requirements and related CFTC Cotton-on-Call Report

These items have been longstanding issues regarding CFTC regulatory overreach and administrative burden, some for over a decade.

New or Amended Product and Rule Submissions

I want to commend CFTC staff in the Division of Market Oversight (DMO) and Division of Clearing and Risk (DCR) for the day-to-day work that supports growth and innovation in our markets.  Under my leadership in my first 100 days as acting Chairman (even without a majority on the Commission), and the leadership of acting DMO Director Rahul Varma, acting DCR Director Richard Haynes, and former acting DMO Director Amanda Olear, our hard working and dedicated DMO and DCR staff have engaged in the following activities, in addition to performing examinations and ongoing monitoring:

DMO

• 670 new products filed by exchanges

• 43 product filings submitted by foreign boards of trade (FBOTs) 

• 315 rule filings submitted by exchanges (211 market rules, 104 product related rules)

• Issued 3 certification letters to FBOTs under Regulation 30.13

DCR

• 63 rule filings submitted by DCOs

This is a snapshot of our dynamic and vibrant derivatives markets, which serve the national public interest mandated in our statute by providing price risk mitigation, price discovery, and price dissemination.[3] 

These day-to-day activities are in addition to the over 20 CFTC staff letters and other guidance, issued in just four months, to provide regulatory clarity and reduce regulatory burden.  DMO and DCR were involved in over half of those, and I want to commend the Market Participants Division (MPD) staff for all of their tremendous efforts as well.  This level of productivity from CFTC staff has not been seen since the first Trump Administration.

Self-Certification Process for Exchanges and Clearinghouses

As I have said before, our system of self-regulation works because our SROs take their role seriously in upholding the CFTC’s regulatory framework and ensuring market integrity.[4]  Self-regulation is effective when it is cooperative.  I commend DCMs, SEFs, DCOs, and SDRs (registered entities) that recognize and support the efforts of our DMO and DCR staff, and I urge these registered entities to do their best to assist staff and make the review process as efficient as possible.

But even more important is that our registered entities must be committed to the rule of law, the public interest, and doing what’s right.  As you know, the CFTC has a principles-based regulatory framework that is designed to provide maximum autonomy and flexibility to our exchanges and clearinghouses.  This enables exchanges to launch self-certified new contracts and issue new rules one business day after submission to the CFTC.  In fact, the CFTC cannot stay or halt trading of a self-certified contract,[5] or suspend or revoke the registration of an exchange or clearinghouse,[6] without conducting an adjudicatory hearing—an in-house trial before the Commission as an administrative tribunal exercising our quasi-judicial authority.  In our entire history, the CFTC has never done so.  And we cannot force compliance with the law and CFTC regulations without obtaining a court order in litigation, whether by an enforcement action or otherwise.

In the past, registered entities have ignored and failed to comply with Commission orders with impunity[7]—presumably because they know that the CFTC has much more limited authority to take action against exchanges and clearinghouses, in contrast to our authority over registered futures commission merchants (FCMs) and other intermediaries.

That means that the self-certification process is built on trust, and it is bad for our markets, for market participants, and for the American people when this trust is broken.  For the CFTC’s hands-off self-certification process to work, registered entities must commit to operate in a “no surprises” environment and work through issues in partnership with CFTC staff.  On our part, the CFTC must commit to engaging in good faith with registered entities and be transparent about our processes. Nobody should be playing games.

Part 40 regulations

I will provide some background in response to questions that have been raised about the CFTC’s self-certification process.  Part 40 was established pursuant to the Commodity Futures Modernization Act of 2000 and has been in place since 2001.  Part 40 created a new framework for the certification and approval of new products, rules, and rule amendments that are submitted to the CFTC by registered entities such as DCMs, SEFs, DCOs, and SDRs.  It was again amended in 2011 pursuant to the Dodd-Frank Act.  The Part 40 Proposal preamble states that Part 40 “govern[s] how registered entities submit self-certifications, and requests for approval, of their rules, rule amendments, and new products for trading and clearing, as well as the CFTC’s review and processing of such submissions.”[8]

As I have noted before, the Commodity Exchange Act (CEA or Act) mandates that the Commission serve the public interest through our oversight of “a system of effective self-regulation of trading facilities, clearing systems, market participants and market professionals.” Part 40 is the cornerstone of effective self-regulation in our derivatives markets because it sets forth the standards for listing new contracts and issuing or amending rules for registered entities, including those that are SROs and have rulebooks that are enforceable against SRO members.  The penalties for violating SRO rules can be severe, including fines, suspension, or revocation of membership.[9]

Stay of self-certification or extension of review period

For example, regarding new products, under Regulation 40.2 the Commission can stay the self-certification of a new product only in circumstances involving a false certification, or a petition to alter or amend the contract terms and conditions pursuant to Section 8a(7) of the CEA.  The self-certification process does not involve Commission approval.  However, under Regulation 40.3, new products can be submitted to the Commission for review and approval, and the review period can be extended if the product raises novel or complex issues.[10]

Similarly, regarding new rules or rule amendments submitted under Regulation 40.5 for Commission review and approval, the Commission can extend the review period for (1) novel or complex issues, (2) major economic significance, (3) incomplete submissions, and (4) not responding completely to CFTC questions in a timely manner.  And under Regulation 40.6, the Commission can stay the self-certification of new rule or rule amendment filings involving (1) novel or complex issues, (2) inadequate explanation, or (3) potential inconsistency with the CEA or CFTC regulations.[11]

These checks and balances are integral to the CFTC’s oversight of registered entities, and I support DMO and DCR staff’s use of all these provisions to extend or stay the review period if any of these criteria have been met—especially if there are, as applicable, incomplete submissions, inadequate explanation, or for not responding completely to CFTC questions in a timely manner.  As I said two years ago, registered entities must ensure that they dot their i’s and cross their t’s, and show their work, when submitting product or rule filings.[12]

Non-approval of new products or new rule or rule amendments

I want to emphasize that the existing Part 40 regulations provide for Commission non-approval of new products, or new rule or rule amendments, only if submitted for review under Regulation 40.3 or 40.5, respectively.  Obviously, a product or rule will not be approved if it violates or is inconsistent, respectively, with the CEA or CFTC regulations.  The Commission can determine that “it will not, or is unable to approve” the product or rule, including for form and content requirements for submission, because the product “violates, appears to violate or potentially violates but which cannot be ascertained from the submission,” or the rule or rule amendment “is inconsistent or appears to be inconsistent” with the CEA and CFTC regulations.[13]

These standards and criteria under Regulations 40.3 or 40.5 grant the Commission and CFTC staff considerable discretion in conducting reviews of product and rule filings for approval or non-approval. Again, I support the Commission issuing a notice of non-approval if any of these criteria have been met. 

However, the Commission’s approval process does not apply to self-certified product or rule filings.  If an exchange or clearinghouse ignores a Commission order or notice of non-approval, the Commission cannot enforce compliance without either conducting an in-house trial or going to federal court to obtain a court order.[14]

Requests for Public Comment on Innovation and Market Structure

There is a line, often not very bright, between what is “business as usual” done in a new way and a truly different and innovative market practice.  The CFTC’s current regulations for DCMs and DCOs are very flexible—they allow for expansion into new ways of trading and clearing without major regulatory changes, but this is coupled with the need to use that flexibility responsibly.  Because our regulations are flexible, the CFTC is typically not focused on writing new regulations.  Instead, the CFTC is focused on how current regulations should best apply to actual proposals that have been submitted to us in a few innovative, but complex, areas.  To inform and assist the CFTC with its regulatory approach to innovation and market structure, we want to make sure to gather, and consider, the expertise and wisdom of the marketplace through requests for public comment. 

24/7 Trading

Many of the main issues raised by 24/7 trading and clearing that will need to be addressed are already clear.  No changes to CFTC regulations are necessary to enable 24/7 trading, which recently went live on Coinbase Derivatives (a DCM) and Nodal Clear (a DCO) in May 2025.  CFTC staff appreciate the firms that engaged with us for over a year to work through these issues, in a great example of the partnership in our markets.

Nonetheless, because of the broader implications for market structure, the CFTC issued a request for comment in April 2025 on the uses, benefits, and risks of derivatives trading and clearing on a 24/7 (or almost 24/7) basis.[15]  That comment period recently closed and CFTC staff are currently evaluating the many helpful responses. 

Collateral exchange

To an extent, derivatives are already trading during low activity time periods and positions are already being held over weekends absent collateral exchange, so a more comprehensive move to 24/7 trading and clearing would bring with it both known and novel characteristics.  The novelties are, in part, related to the different schedules of specific market operations.  For example, trading may be continuous, but parts of the clearing process, such as exchange of collateral, require point-in-time calculations and periodic finality while risk continues to accrue.  This risk may be mitigated where client clearing takes place through FCMs that are highly capitalized and thus central counterparties (CCPs) can accept short-term credit exposure.

Practices must be adapted for trading over weekends where (at least for the moment) collateral exchange is not possible.  Without on-call collateral, CCPs need pre-funded collateral to address credit and related liquidity risks that arise over a weekend. This raises questions about calibrating the possible exposures, such as the appropriate “margin period of risk” (MPOR) where collateral access is lost for more than one trading day.  Related, other risks like those associated with market liquidity may be mitigated if other similar markets are also open during the weekend, emphasizing the value and need for 24/7 spot market access for a broader liquidity pool.

Operational challenges

Many commenters to the CFTC’s request for information make a related but much broader point—24/7 trading must be evaluated holistically due to the effects not only on trading platforms and clearing houses but also the changes that would be required of FCMs, market participants, asset managers, third-party service providers, and others to account for changes in liquidity, price transparency, collateral access, and default management during non-traditional business hours.  These commenters stress that significantly increased costs would likely be borne by all market participants, not just those that choose to trade (or intermediate) 24/7.  For example, they note that these changes in market structure may also require renegotiation and redocumentation of relationships between market participants, such as between asset managers and FCMs.

Many commenters point out that trading on a 24/7 basis may require CCPs, exchanges, intermediaries, their third-party service providers, asset managers, and others to have staffing virtually 24/7.  It will be important to maintain focus and resources on platform maintenance while markets are open, including dealing with unplanned outages, patch management, live change deployments, and rollback mechanisms, though some commenters suggested that some of these difficulties could be mitigated by having a maintenance window each day (such as 24/6 or 24/5 trading instead of true 24/7 trading).

Market conditions, liquidity risk, and credit risk

Concerns have been raised that low volume periods during weekends will cause diminished liquidity, wider spreads, increased volatility, and reduced price transparency, raising risk coverage questions similar to those noted above.  CFTC staff will need to address whether, on a product-by-product basis, other markets (cash markets, repo markets) will be available to make derivative pricing practicable.  In sum, there are concerns that risk management will be significantly challenged when high volatility and low liquidity paired with limited collateral asset mobility leads to increased defaults during a period when there may be limited ability of FCMs and CCPs to close-out positions or hedge associated risks.

Solutions to these issues are always informed by anticipated benefits and costs of paths ahead.  The liquidity and credit risk concerns noted above drive the need for additional collateral or other measures to protect against weekend market moves, and a need to reduce or mitigate the effects of auto or manual liquidations.  This, of course, comes at a cost; posting excess margin, potentially at multiple exchanges, may have a negative impact on the efficient use of capital by market participants.  Moreover, some commenters expressed fears that, in times of high volatility, additional costs could rise to the fore.  For instance, elevated volatility could erode posted collateral to such an extent that positions may be unexpectedly auto-liquidated, leaving end-users without critical hedges.

One view to consider, if sufficient data allows, would be to limit trading to only specified contracts that have sufficient customer demand for weekend trading to help ensure liquidity and appropriate pricing.  A number of commenters suggested that some products would be more appropriate for weekend trading than others.  I have previously noted the value of having already existing spot markets that trade 24/7, broadening the liquidity pool over the weekend period.  Consistent with this view, the proposals that the CFTC staff have seen so far have only focused on crypto asset products, where spot markets exist with continuous trading and sufficient depth of liquidity.  The CFTC is not aware of any plans to offer 24/7 trading beyond the crypto asset class at this time.

For more traditional commodities, like agricultural commodities, liquidity and pricing concerns would likely need much deeper review, since the listing of contracts with limited open interest or trading volume for weekend trading may distort pricing and increase the risk of liquidations over the weekend—a fear expressed by many commentors who rely on the ability to maintain carefully constructed portfolios to achieve success in their trading strategies.

CFTC staff are starting to get some informative data on market innovation towards more continuous trading hours.  Last month, 24/7 trading started on Coinbase Derivatives for a few crypto asset derivatives contracts, where the spot market is already open 24/7.  These first few weeks of trading have provided a useful window into the level of interest and viability.  In the last few weeks, weekend trading has been averaging over a thousand individual traders, across volumes that fall in the hundreds of thousands of lots, similar to an average (or even somewhat active weekday).  So, it may be the case that for markets already used to 24/7 trading, the extension to futures is less unbridgeable than it may be for other contracts.

While there is a natural tendency to focus on the risks created by 24/7 trading, CFTC staff is also aware that weekend trading may allow for more real-time risk-reducing trades in response to unexpected events. These events—whether geopolitical, weather-related, or otherwise—can happen over the weekend, and forcing market participants to wait until Sunday afternoon in the U.S. to deal with them creates risks of its own.  That is why it is imperative to consider the benefits of market innovation, and not to only focus on the downsides.

Other regulatory changes that CFTC staff may consider to address clearing member credit risk might allow for the use of tokenized assets such as non-cash collateral[16] or stablecoins, or other forms of margin that are not dependent on banks being open.

Other considerations

On the regulatory side, CFTC staff is also aware of other open questions such as existing definitions, like CFTC regulations that reference a “business day” that does not include weekends and holidays.  In addressing these cases, we would need to identify ways to both maintain the regulatory status quo for non-continuous markets and find flexible but effective procedures for 24/7 markets.

Perpetual Derivatives

A key trend in derivatives markets is an increase in retail trading.  In addition to the exponential growth in non-intermediated direct access retail trading and clearing, markets are keen to launch new retail-focused products.

There has been much confusion about perpetual derivatives in CFTC-regulated markets.  Contrary to public reports, perpetual derivatives have already been trading in our markets for several months.  In April 2025, Bitnomial Perpetual Bitcoin USD Centi Futures went live and started trading. 

Since the beginning of this year, a number of DCMs have self-certified the listing of perpetual derivatives.  (Again, under the CFTC’s self-certification process, no Commission approval is needed.)  CFTC staff appreciates the ongoing and active engagement with exchanges seeking to self-certify perpetual derivatives and their assistance in responding to questions and providing information.  To benefit from public input, CFTC staff also issued a request for comment on the potential uses, benefits, and risks of trading and clearing of perpetual derivatives contracts in CFTC-regulated markets (Perpetuals RFC).[17]  That comment period recently closed and CFTC staff are currently evaluating the many helpful responses.

Comments in response to the Perpetuals RFC included a variety of viewpoints, reflecting the complexity of introducing a very different product type into markets that remain conceptually organized around intermediated, margined trading in physical delivery commodities. Nonetheless, the comments received reflect several themes that may be helpful in organizing market and regulatory perspectives going forward.

A number of commenters were supportive of perpetual derivatives in the context of crypto asset markets.  They noted that perpetuals provide a continuous, lower cost spot-like exposure that does not need to roll out of an expiring futures contract to retain a position.  Commenters also noted potential advantages to bringing crypto asset perpetual derivatives to the U.S. market and under the U.S. regulatory umbrella.

At the same time, several commenters raised concerns around the suitability of perpetual derivatives involving traditional physical commodities.  They expressed concern about a potential lack of convergence with the physical market given the absence of expiration, potentially making perpetuals ineffective for hedging longer term price risk.  Some thus see perpetuals as inconsistent with the risk management and price discovery function of futures markets.  Some commenters also argue that perpetual derivatives may present increased risk relative to traditional futures, including increased volatility, funding rates, leverage risk, and heightened potential for manipulation.

Basis risk

As a spot-market substitute, there is the usual risk management question around basis risk:  perpetual prices vs. spot prices, perpetual prices vs. futures prices. Many major market events in the last few decades involved mismanagement of basis risk, often due to liquidity differences leading to divergence.  Basis risk can rapidly increase when liquidity providers are different across two similar products or when the balance of buyers and sellers are significantly different across two similar products.  Accordingly, CFTC staff are interested in how the participant mix for perpetuals will be similar or different from that for related spot or traditional futures, especially if one market is dominated by institutional investors and the other dominated by retail.  Will we see a “tail wagging the dog” phenomenon, with retail investors driving the price movements of institutional positions?

What the CFTC usually sees in traditional futures markets is that there is balance between institutional hedgers and institutional speculators in a primary market, with related retail markets (i.e., mini and micro futures) much smaller than the institutional market.  What happens in a case where the retail contract (perpetuals) becomes much larger than the related institutional product (traditional futures)?  Should there be concern that this may harm traditional roles of risk transfer and price discovery?

Direct Access and Non-Intermediated Clearing

Many of these same issues may also apply to non-intermediation in derivatives markets—providing direct access to market participants (particularly to retail traders) and clearing by CCPs of such direct access customers’ positions in individual accounts.

In intermediated markets, FCMs clear customer positions as DCO clearing members and guarantee their customers’ positions to the DCO.  Those DCOs build trust in their clearing members by setting and monitoring membership requirements, including capital requirements that match capital to risk, and requiring the review of their members’ risk management procedures.  This trust is enhanced because clearing members protect not only their own and their customers’ positions but also, through mutualization, provide a backstop for the positions of all other clearing members—a defense-in-depth approach that has served the U.S. derivatives markets almost flawlessly for decades.

FCMs clearing for their customers provide a check on the appropriate setting of margin by CCPs through their own risk management processes.  FCMs know their customers, their businesses, and their resources, and will often call for additional margin from specific customers based on their independent credit risk assessments.

In a case where a CCP has thousands of direct participants, many of them retail, this detailed knowledge and associated trust is much more challenging.  As a result, all presently operating direct clearing retail DCOs are clearing only fully collateralized contracts where there is no need to accept credit exposure (or to call for additional collateral).

Auto-liquidation and tear-ups

CFTC staff are now being asked to consider whether this low trust/no trust model can be extended to a leveraged world where risk management will need to look very different.  In a world like this, the “heartbeat” of CCP risk management will likely need to match that same cadence in trading, at least implying the need for real-time posting of collateral—a “pay in cash, not in credit” model.  When the cash is insufficient—for example, when a customer’s margin has eroded below maintenance margin level as the market moves against them—the account will need to be closed, leading at first to a rules-based liquidation process.

Unfortunately, this process to protect the CCP from individual participants may, in certain severe circumstances, harm the system as a whole.  Some commenters pointed out the possibility that auto-liquidations in volatile or illiquid weekend markets could be procyclical, leading to additional liquidations, and broader market instability.  These feedback effects may be especially pronounced during times of extraordinary stress, when liquidation is paired with unusually low available liquidity.

A number of questions are yet to be answered for risk management in a leveraged, direct model:  What should the default waterfall look like in a direct access world? Should the risk of one retail trader be mutualized by other retail traders?  If not, are there other resources that can play the role of the traditional mutualized resource tranche?  What is the equivalent of the key “Cover 2” requirement in a world of direct access retail trading, where a CCP’s clearing members number in the thousands rather than the dozens?  How does one define “extreme but plausible” in such a world?  Many fundamental principles need to be re-analyzed where the credit risk and capital structure of clearing members is much different than today’s intermediated model.

If traditional protections like prefunded mutualization are not feasible, or feasible only to a reduced extent, then it appears CCPs may need to shift more quickly to other default solutions like “variation margin gains haircutting” (VMGH) and tear-ups.  This might leave markets to grapple with a situation where solvent market participants may not get money they are expecting or find that they don’t hold the positions that are expecting.

While these tools are already baked into the rules of most existing CCPs, they’ve not been used during this century.  If they are invoked at one direct-access CCP, what would that do to market confidence at other CCPs?  All of which leads to the most important question—can these markets still reliably play a role for hedgers who need position continuity? Will the value of futures markets be fundamentally changed, and not for the better?

Technology innovation

Given the pace of innovation, it’s clear that direct clearing models will also be impacted by impending changes, like 24/7 trading and clearing.  CFTC staff are now contemplating whether 24/7 trading and a direct clearing model where collateral needs to be exchanged in real time is even possible without the creation and adoption of new forms of collateral, like tokenization, which are not limited by banking hours.

Here, CFTC staff think operational resiliency will be essential because market downtime will result in the loss of the needed real-time exchange of collateral.  There will also need to be an extensive customer engagement and education process to deal with large numbers of relatively small traders, paired with robust surveillance and operational and volatility controls to handle potentially highly disruptive activities like gamification, meme-ification, and other digital engagement practices likely to follow on to thousands of retail participants in these markets.

Customer protection

On the regulatory side, CFTC staff are tasked with determining where, in non-intermediated markets, the crucial obligations traditionally handled by intermediaries will be fulfilled.  I proposed last year that a captive FCM model would achieve the direct clearing market structure for DCMs/DCOs while preserving the important regulatory obligations that intermediaries perform, such as the laborious task of creating and disseminating risk disclosures, trade confirmations, and monthly account statements, complying with AML/KYC obligations, and of course, the bedrock of customer protections: segregation of customer funds, limited investments, acknowledgements from depositories, and daily seg reporting.[18]  Because a CCP is already an SRO, it does not make sense for it to be a member of an SRO such as NFA, FINRA, or similar organization, which are designed to be member organizations for intermediaries such as FCMs or broker-dealers and their personnel.

Partnership and Trust

I would like to share a message from CFTC staff to those seeking to innovate or significantly improve the traditional way of operating a market or CCP: 

We are open to ideas, open to changes that will help the processes of price discovery and risk management.  But, please, engage the CFTC early in the development of novel and innovative products and market operations.  Too often, the CFTC is brought into the conversation long after crucial decisions have been made and resources expended, only to face regulatory obstacles that could have been avoided.  Self-certification should be the end of a dialogue with the CFTC, not the beginning.  Come talk to us.  Get a preliminary view before you commit to a particular course of action.  We are here not as an opponent or enemy, but as a sounding-board, someone who can help identify how innovations can be made consistent with our regulations or point to open questions that need to be answered.

The CFTC staff have the expertise and knowledge to assist in identifying the challenges of innovations like the ones I have discussed. CFTC staff can help, often even at early stages, noting requirements that need to be accounted for in product and operational designs.

Most importantly: Help us, help you.  CFTC staff are happy to discuss and provide preliminary views.  But this is often most helpful when innovators come to these discussions prepared, having reviewed CFTC regulatory requirements with knowledgeable professionals and thus ready to offer helpful solutions or alternatives.  Have answers to the questions you know we’ll ask. Consider and develop your trading, clearing, product, staffing, system, and operational plans early in the process. Engage with all relevant CFTC offices and divisions.  Don’t surprise us—don’t wait until the last minute to approach us before submitting an application, product, or rule filing.

Conclusion

Let me conclude by saying that the innovation and market structure that I have discussed appears to be just the beginning.  The pace is likely to increase in the coming years. We can only imagine the future of the derivatives markets and the business processes used in today’s trading and clearing systems.  That’s why it is critical that the CFTC must engage in smart regulation that is balanced with input from all stakeholders.  I believe that we can work cooperatively with both new entrants and traditional markets to incorporate innovation while maintaining market integrity.

Markets operated smoothly throughout the recent volatility and all-time high volumes, and that’s a testament to the strength of U.S. capital markets and our regulatory framework that has been in place for almost a hundred years.  Since the 1930s, both derivatives and securities markets have gone through many transformative changes, from open outcry trading in the pits, to all-electronic trading on screens in fractions of a second.  Each transformation has resulted in the continuing dominance of U.S. capital markets and American innovation.  I look forward to seeing what’s next as we transform our markets again to create greater efficiencies and drive prosperity for American businesses and the American people.

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