The Commodity Futures Trading Commission (CFTC) has issued a Request for Comment to gather public input on issues related to derivatives clearing organizations that offer direct clearing services to retail traders, known as Retail DCOs. These services can be provided through a fully-collateralized model with direct access for retail participants, or a hybrid model that combines both direct and intermediated clearing by futures commission merchants.
Acting Chairman Caroline D. Pham stated, “Since 2022, I have repeatedly called for the CFTC to increase its focus on retail protection as our markets continue to evolve, with new technology providing direct access for retail traders that would have been unimaginable just a few years ago. For example, there has been an exponential increase in direct clearing for retail traders, where there are no brokers such as CFTC registered futures commission merchants that protect customer funds and protect against abusive sales and marketing practices. In 2023, I proposed a tailored registration framework for Retail DCOs that would address risks and potential retail binary options fraud. It is incumbent upon the Commission to consider how to update our regulations for market structure developments, because innovation thrives when there are clear rules and safeguards for all participants, from retail traders to the biggest market makers.”
The CFTC staff’s request seeks feedback on measures that could mitigate risks unique to these structures. Potential steps may include specific requirements regarding retail protection, governance and risk management, conflicts of interest, market conduct and integrity, transparency, or creating a new registration sub-category for Retail DCOs.
The comment period will remain open until January 19, 2026. Comments can be submitted electronically through the CFTC’s online process.
