CFTC issues advisory on DCM incentive-program filings under Regulations 40.5 and 40.6

The Commodity Futures Trading Commission's Division of Market Oversight warned designated contract markets that self-certification filings for market-maker, liquidity and trading incentive programs under Regulations 40.5 and 40.6 are becoming more frequent but are often incomplete, particularly for event contracts and prediction-market products. Staff said exchanges must fully describe program terms and certify compliance with the Commodity Exchange Act and CFTC rules before new products or rule changes take effect, and that weak submissions can prevent the agency from judging surveillance, controls and other core-principle obligations. The advisory also reiterated that volume-based rewards, rebates, guaranteed-profit arrangements or loss coverage can skew trading incentives and raise the risk of wash trading, pre-arranged trades and other manipulative conduct. The warning adds that incomplete or misleading certifications could expose venues to enforcement action as the CFTC tightens scrutiny of the fast-growing U.S. event-contract market.

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