Expanding Regulatory Reach Over Intermediaries That May Constitute Regulated Exchanges

In response to changes in business practices, regulations and laws eventually change, too. During the past few years derivatives markets are witnessing this change as it applies to trading facilities as well as to entities that provide services that may be ancillary to intermediated swap execution. Indeed, the lines are becoming blurred between a traditional derivatives exchange and a facility or an entity that only a few years ago no one would recognize as an organized exchange.

U.S. financial regulators, such as the Commodity Futures Trading Commission ("CFTC") and the Securities and Exchange Commission ("SEC") struggle with conceptualizing whether, how and to what extent they can regulate intermediaries and the decentralized finance ("DeFi") facilities that offer swap execution services. On the one hand, an increasing number of intermediaries such as commodity trading advisors ("CTAs"), introducing brokers ("IBs"), swap dealers ("SDs") or unregistered