SEC staff seek views on exchanges owning brokers as four Form 1-N security futures venues line up

The SEC’s Division of Trading and Markets has asked for public comment on affiliations between national securities exchanges and the broker-dealers that trade on them. Its statement points directly to a new group of vertically integrated security futures venues.

Staff published the statement on 30 September. It notes that the Commission “recently received four Form 1-Ns” from entities seeking notice registration as security futures product exchanges under Section 6(g) of the Exchange Act. According to staff, each applicant discloses an affiliated futures commission merchant (FCM) that will:

• perform introducing-broker functions
• extend margin to customers
• hold client funds and property
• be a member of the exchange for trading security futures

None discloses an affiliate that will trade in a principal capacity. Staff add that some of the applicants have already filed rule changes setting margin and listing standards for their products. The statement does not name the applicants.

Old concerns, new products

The statement sets out the statutory starting point:

• Section 6(b)(1): an exchange must be able to enforce compliance by its members.
• Section 6(b)(5): its rules must not permit unfair discrimination.
• Section 6(b)(8): its rules must not impose unnecessary burdens on competition.

Staff stress that a notice-registered security futures exchange is a national securities exchange and is covered by all three provisions.

Staff also recall the Commission’s earlier view, given when it approved past exchange–broker affiliations, that “the financial interests of the national securities exchange may conflict with its responsibilities as an SRO regarding the affiliated broker-dealer”. According to the statement, the Commission has said a conflict arises if an exchange gives its affiliate advantages not available to other members, such as “greater access to information, improved speed of execution, or enhanced operational capabilities”. The Commission has also questioned whether an affiliated introducing broker should be treated as a facility of the exchange.

The statement links this to a CFTC proposal on affiliations among CFTC-regulated entities. That proposal would require disclosure of FCM–DCM affiliations and would set conflict-of-interest requirements for DCMs with affiliated FCMs and principal trading firms.

Staff invite comment on affiliations covering both customer broking and principal trading, “particularly in light of the growing market interest in listing novel products”. Comments go to File No. 4-936. The statement has no legal force and creates no new obligations.

Why it matters

The four Form 1-N filings are the route through which US-regulated single-stock futures and similar products could reach retail users through an integrated app, exchange and FCM. That is the model many crypto-native firms run offshore. If SEC staff and the CFTC converge on conflict rules, the likely requirements are:

• equal access to data and connectivity for all members
• separation of the affiliate’s order flow
• clear disclosure of who stands behind customer margin and custody

For incumbent brokers and market makers, the questions are about access and competition. A venue that also controls the main customer on-ramp could push neutral brokers to the margins unless the SEC insists on equal terms. Firms planning to connect to these venues, or to compete with their affiliated FCMs, now have a docket in which to make those points.

Sources

• SEC Division of Trading and Markets, “Staff Statement on Affiliations Between National Securities Exchanges and Broker-Dealers”, 30 September 2026 (File No. 4-936) — https://www.sec.gov/newsroom/speeches-statements/tm-statement-affiliations-093026