CFTC and SEC seek clarity on swaps definitions amid CME lawsuit

The CFTC and SEC have launched a joint request for public comment on updating definitions of 'swaps' and 'security-based swaps'. The move aims to clarify longstanding ambiguities in these terms. Meanwhile, CME Group has filed a lawsuit against the CFTC over its classification of perpetual futures contracts. The joint request seeks input on the scope of exclusions from these definitions. It also addresses the treatment of mixed swaps and emerging products like event-based contracts. CFTC Chairman Michael Selig stated the goal is to resolve uncertainties that have hindered fair competition and innovation.

SEC Chairman Paul Atkins called the clarification on Title VII definitions 'long overdue'. He specifically highlighted the need to address event-based products. The public comment period will run for 60 days after publication in the Federal Register.

Separately, CME Group has taken legal action against the CFTC. Its lawsuit argues that the regulator misclassified perpetual futures as futures contracts. CME contends these products meet the Dodd-Frank definition of a swap and should be regulated accordingly. The outcome of this debate will determine which regulator oversees perpetual futures and prediction-market contracts. It will also define the rules for new entrants in the US derivatives market. The resolution depends on whether the courts or the public comment process redefine the boundaries of these financial products.