Davis Polk partner Zach Zweihorn discussed single-stock futures and their regulatory framework with Risk.net.

The article explains that the Chicago Mercantile Exchange (CME) plans to launch single-stock futures with an initial focus on top tech companies. Single-stock futures are subject to regulation by both the SEC and the Commodity Futures Trading Commission (CFTC), though there are various special securities rules as well as exemptions for the instruments.

This joint oversight makes the regulatory structure “complex,” Zach said, noting that it may have contributed to their slow adoption. “Because these haven’t been offered in a while and OneChicago had limited success and closed years ago, it hasn’t been an area a lot of people have focused on.”

While single-stock futures are listed on futures exchanges, these exchanges must “notice register” with the SEC as a stock exchange as well. This means they are subject to some, but not all, SEC requirements for exchanges, Zach explained. “I believe the CME actually notice-registered many years ago, and has rules for security futures, even though they don’t currently offer them.”

“CME to launch single-stock futures,” Risk.net (December 12, 2024) (subscription required)

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