Fostering Regulatory Harmony Between the SEC and CFTC

Good afternoon, ladies and gentlemen. It is a pleasure to join you here at Boca 2026-a gathering that represents both the depth of the derivatives industry and the dynamism of the ideas and infrastructure that undergird modern risk transfer.

The derivatives markets represented in this room are among the most sophisticated in the world. When these markets function well, they distribute risk to those who are best positioned to bear it. When these markets are burdened by fragmentation and regulatory friction, liquidity recedes, costs rise, and resilience weakens.

The coherence of our regulatory frameworks determines which of those outcomes prevails. So today, I want to speak about regulatory harmonization between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).[1]

Learning from Our History

Now, before I proceed further, it is instructive to place the harmony that we are working toward within the context of our history. For decades, Congress has maintained a functional division between the regulation of securities and commodity derivatives. That framework has served our markets well. After all, the Securities Exchange Act and the Commodity Exchange Act reflect different histories and distinct purposes.

The SEC, born from the ashes of the 1929 market crash, has overseen securities markets with a mission to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The CFTC, while formally created in 1974, has deep roots regulating commodity futures and commodity derivatives markets with its own statutory framework and regulatory philosophy.

This division perhaps made some sense at a time when these two markets were distinct ecosystems. But over time, innovation has a way of blurring those boundaries.

When regulatory regimes fail to keep up-and diverge without clear justification-efficiency does not improve, and market integrity does not strengthen. Instead, unnecessary divergence simply imposes cost. Regulatory friction is a tax on efficient risk allocation, and in globally competitive markets, that burden is ultimately borne by American investors, savers, and businesses.

With these principles in mind, and under President Trump's leadership, I am pleased to report that we are reorienting our approach toward a new golden age of regulatory coherence. Yesterday, Chairman Selig eloquently offered you all a glimpse into that golden age by affirming that "harmonization is not a side-show; it is integral to opening up new avenues for entrepreneurs. Once innovators know that regulators are paying attention to their own core mandates, these risk-takers are more likely to move forward."

Recognizing Equivalence: Substituted Compliance

Which is why I should now like to turn to substituted compliance-not in the traditional cross-border sense, but as a principle to apply between the SEC and the CFTC themselves. I have previously described the concept of a regulated "super-app." In the technology world, a super-app integrates multiple services into a single seamless interface. The user does not toggle between separate systems to complete related tasks. Instead, integration occurs invisibly behind the scenes.

Financial regulation today reflects the opposite design. A dually registered firm must navigate two agencies, two regulatory regimes, two or more examination cycles, two reporting pipelines, and often two supervisory cultures, even where the underlying risks are substantially similar. And that is before accounting for the additional layers that may apply if the firm is part of a bank holding company or subject to oversight by an SRO.

The principle that ought to guide us instead is straightforward: where one agency's framework achieves comparable regulatory outcomes, then it should be capable of satisfying overlapping requirements of the other. Of course, our objective is not to precipitate regulatory arbitrage, but to produce regulatory coherence.

Product Coordination: Transparency and Collaboration

Now, more than aligning our rules, a harmonized framework also demands coordinating our responses to the firms that operate within it, including those that have questions of interpretation or request exemptive relief. When firms approach the agencies, they should receive clear answers, not prolonged silence. Derivatives traders are a creative, energetic bunch that should not feel compelled to avoid a bespoke arrangement just because it is near the jurisdictional lines.

To these ends, I have directed staff to begin joint meetings with CFTC staff on product applications. We have also launched a SEC-CFTC Harmonization webpage where market participants can request coordinated discussions with staff from both agencies.

Firms should not be shuffled back and forth between regulators when a product touches elements of both regulatory frameworks. Nor should clarity depend on which agency happens to speak first. Where jurisdiction overlaps, the most effective response is a coordinated one.

Cross-margining offers one clear opportunity to unlock liquidity that would otherwise have remained frozen in separate accounts.

We have also received significant interest in innovation earlier in the trade lifecycle. Tightly correlated cash and futures products reflect market efficiency. Market participants may explore approaches to "trade a package" to bring about this efficiency. Speaking in broad terms, both the CFTC and SEC may need to consider relief to make these sorts of products possible. I encourage the industry to continue to bring these ideas to us and have instructed the staff to work with the CFTC staff to find viable paths forward where possible.

Paving the Way for Innovation in SEC-regulated markets

We should also consider whether our own procedural timelines appropriately reflect the pace of modern markets. For example, the statutory framework governing exchange rule filings was designed to provide a meaningful review period, but not to impose unnecessary delay. Congress contemplated a baseline review period measured in weeks, not months, and the Commission should remain attentive to whether current practices are consistent with that intent-particularly for bringing novel products to market.

In addition, it is past time that the Commission work with the CFTC to provide clarity on a range of Title VII definitional issues, including whether certain event contracts may be security-based swaps or other types of securities, such as options on securities.

National securities exchanges are increasingly exploring the role that event-based products might play within SEC-regulated markets. These instruments can offer transparent, exchange-traded ways for market participants to express views about economic outcomes or hedge discrete risks. Whether registered with the SEC or with the CFTC, market participants deserve clarity and good-faith cooperation from their regulators.

Through our efforts to do so, we can create a level playing field where established firms and new entrants alike can compete and innovate on equal footing - each having a seat at the table in shaping the future of our financial markets. Whether you are based in Chicago, New York City, Dallas, or Miami, I am confident that we can work together to facilitate increased competition in the marketplace.

Coordinated Oversight: Examinations and Enforcement

Harmonization is not limited to rulemaking. As we speak, the SEC and CFTC are considering an updated Memorandum of Understanding (MOU) between the agencies to guide coordination and collaboration that can support innovation, uphold market integrity, and ensure investor and consumer protection.

As will be highlighted in our Harmonization MOU, examination and enforcement oversight present opportunities for coordination-and can create similar costs in its absence. Many institutions operate under both regulatory regimes simultaneously. Yet examinations may proceed without regard for each other and the burdens imposed by multiple, potentially overlapping exams.

Coordinated exam planning for dually regulated entities should become standard practice. Shared supervisory findings, subject to assurances of confidentiality, should be the norm rather than the exception. In practice, this will require that the SEC often coordinate not just with the CFTC, but also with SROs that deal with registrants daily, such as FINRA and the National Futures Association.

With regards to enforcement, let me be clear: the regrettable era of duplicative enforcement actions and conflicting remedial obligations for the same conduct is over. Conduct in a single operating environment means that the SEC and CFTC, within the bounds of their independent statutory authority and regulatory interests, should coordinate legal theories and remedial strategies. Fragmented, redundant enforcement does not increase deterrence-it only increases confusion.

Quality over Quantity: Data Reform

Swap and security-based swap data is another area where harmonization has delivered, and can continue to deliver, significant benefits. Since the advent of security-based swaps reporting in 2021, SEC market participants have universally relied on the Commission's temporary SBSR Compliance Statement to report security-based swap transactions in a manner consistent with CFTC rules.

The Compliance Statement is set to expire in 2029, and I have asked the staff to consider any necessary amendments to Regulation SBSR with the goal of codifying a harmonized reporting regime. We also plan to work closely with the CFTC to ensure that we are collecting the data necessary to meet statutory objectives-no less, no more.

When we require extensive data without appropriately calibrating the burdens and benefits, we can actually hinder rather than enhance understanding and accountability. I welcome feedback from market participants on how we can further improve and modernize our security-based swap data reporting regime.

The Path Forward: Coherence as a Competitive Advantage

In closing, I take as my final words those of Adam Smith, who published the Wealth of Nations exactly 250 years ago yesterday. In his abiding wisdom, Smith posited that prosperity requires little more than "easy taxes" and the "tolerable administration of justice." By that measure, the regulatory morass that has been built, including duplicative obligations for identical risks, falls short.

The SEC and the CFTC operate under distinct statutes entrusted to us by Congress, and we must administer those mandates faithfully. But fulfilling our responsibility does not require fragmentation; in fact, it calls for coordination. Properly executed, harmonization furthers our statutory mission through a commitment to coherence across markets that increasingly function as an integrated whole. We can do better-and we intend to.

The United States leads global derivatives markets because our regulatory system is credible. Credibility rests on more than rules alone. It rests on clarity. On consistency. And on a widely held confidence that regulators coordinate intelligently in lieu of competing in turf wars that offer no benefit to investors.

As we continue this work, I want to thank the many market participants here who are engaging constructively with our agencies. I am also grateful for the dialogue that this forum helps to facilitate. It has been a pleasure speaking with you today. You all have been a very patient and indulgent audience. And Walt [Lukken], I very much look forward to the discussion to follow. Thank you.