Senator Britt Calls for Investor Protections as New Stock-Linked Trading Products Near Launch

WASHINGTON, D.C. — U.S. Senator Katie Britt (R-Ala.), a member of the Senate Committee on Banking, Housing, and Urban Affairs, today raised the importance of regulatory clarity and investor protections as Designated Contract Markets (“DCMs”) prepare to introduce new financial products tied to the prices of individual U.S. stocks. Several DCMs have recently proposed offering perpetual derivatives, which allow investors to gain exposure to stock price movements without owning the underlying shares or facing a fixed contract expiration date. Certain filings could become effective as early as November 2. In a letter to Securities and Exchange Commission (SEC) Chairman Paul Atkins, Senator Britt expressed support for the SEC’s ongoing efforts to modernize financial regulation and encouraged continued coordination with the Commodity Futures Trading Commission (CFTC) to clarify how existing securities and derivatives laws apply to these products and ensure appropriate safeguards are in place before they become widely available to retail investors. While these products could offer investors new opportunities to participate in financial markets, they also present important considerations for market integrity and investor protection. In particular, trading in derivatives tied to individual stocks could influence the prices of those stocks, even though the activity would occur outside traditional securities exchanges and under a different regulatory framework. Effective coordination between securities and derivatives regulators is therefore important to maintaining comprehensive market oversight. “America’s capital markets are the strongest in the world because investors have confidence in their fairness, transparency, and integrity,” said Senator Britt. “Financial innovation is essential to maintaining that leadership, and I appreciate Chairman Atkins’ commitment to fostering innovation while protecting investors. As new products emerge, it is important that our regulatory framework keeps pace so investors can continue to have confidence in our markets. When trading novel financial products that can affect the price of an American company’s stock, coordination between regulators is particularly important.” The SEC and CFTC have already taken important steps to address the regulatory treatment of innovative financial products, including jointly soliciting public comment on perpetual derivatives. Senator Britt’s letter builds on those efforts by highlighting additional considerations as the agencies continue evaluating the appropriate regulatory framework for equity-linked products. In her letter, Senator Britt seeks greater clarity on how regulators would detect manipulation across securities and derivatives markets, what protections would apply to retail investors, and whether increased trading in these products could have broader implications for American companies and capital formation. She also encourages consideration of the potential consequences for investors and markets if legal questions surrounding the classification of these products arise after trading begins. “This is about ensuring that innovation continues to strengthen our markets and reinforces investor confidence,” continued Senator Britt. “Chairman Atkins and the CFTC have demonstrated a commitment to thoughtful regulatory modernization, and I appreciate their work to provide clarity for emerging financial products. I look forward to supporting their efforts to establish a framework that gives investors and market participants the certainty they deserve while preserving the integrity of America’s capital markets.” You can view the full letter here . ###