Citadel Securities urges SEC to regulate equity-linked products, citing regulatory loophole

Citadel Securities, one of the largest market makers on the planet, has formally asked the SEC to step in and claim jurisdiction over equity-linked event contracts tied to US public companies. The firm submitted a comment letter to both the SEC and CFTC on September 9, arguing that certain trading venues are gaming the system by routing products through the CFTC’s lighter-touch approval process instead of submitting to SEC scrutiny. The core complaint is straightforward: some platforms are listing what are essentially bets on public company performance metrics, like sales figures or passenger counts, by self-certifying them through the CFTC. That process lets trading begin the next business day without any public comment period. The SEC’s review process, by contrast, involves considerably more regulatory scrutiny. Citadel’s position is that these products look, walk, and quack like securities, and should be regulated accordingly. The self-certification shortcut The CFTC’s self-certification mechanism was designed to allow commodity futures exchanges to efficiently list new products. A venue files the paperwork, and unless the CFTC objects, trading can start almost immediately. It’s...