USA LAW AND PRACTICE Contributed by: Margo H.K. Tank, Michael Fluhr, Era Anagnosti, Kristin Boggiano, David Stier, Liz S. M. Caires, Adam Dubin, Emily Honsa Hicks, Kathleen Birrane and Chezelle McDade, DLA Piper LLP
tively permissionless, allowing users to create their own pools with compatible tokens of their choosing. CTFC regulates the listing of digital asset derivative products. Under CFTC guidance, trading platforms and clearing houses should: • partner and have information sharing agreements with spot market platforms that follow KYC/AML rules; • monitor price settlement data from spot markets and identify/investigate anomalies or dispropor - tionate moves; • set large trader reporting thresholds at five Bitcoins or less; • regularly co-ordinate with CFTC staff and provide trade data; and • allow CFTC staff to review initial and maintenance margins for cryptocurrency futures. The CEA provides a self-certification process for new digital asset commodities products to be listed on designated contract markets (DCMs) or through swap execution facilities (SEFs). 6.5 Order Handling Rules For both retail and non-retail commodities transac - tions, CFTC order handling rules require futures com - mission merchants (FCMs), SEFs and DCMs to exe - cute orders fairly and orderly – there is a prohibition on front-running. Order handling rules do not apply to 6.6 Rise of Peer-to-Peer Trading Platforms The regulation of P2P trading platforms in the USA is dependent upon whether the digital asset being traded is a security, a commodity, or another digital financial asset subject to the UCC or other federal or state law. SEC has asserted that certain P2P platforms offer securities and are subject to US securities laws. SEC has historically required and enforced registration by different P2P lending platforms. However, SEC now seeks to modernise its regulatory approach towards digital assets and DeFi, including creating “Project spot exchanges trading digital assets. See 10.8 Cryptocurrency Derivatives .
Crypto”, setting up roundtable discussions with mar - ket participants to explore paths toward regulatory clarity, and collaborating with CFTC in an effort to har - monise regulatory frameworks regarding digital assets and crypto-related activities. See 6.4 Listing Standards for a discussion of CFTC and SEFs. The extent to which decentralised P2P platforms trading CFTC-regulated commodities are subject to CFTC regulation also remains unsettled. See 10. Blockchain . 6.7 Rules of Payment for Order Flow To the extent that US federal securities laws apply to a platform, payment for order flow typically implicates broker-dealer/customer relationships and is regulated by SEC and FINRA rules. Also, best execution obli - gations and anti-fraud provisions can be implicated if payment for order flow results in a broker-dealer directing a transaction to a platform for execution when better terms are available elsewhere. SEC Reg NMS has rules that require a broker-dealer to execute in a particular manner. SEC proposed Regulation Best Execution which, if finalised, would apply to digital assets that qualify as securities and impact practices governing payment for order flow. 6.8 Market Integrity Principles US securities regulations, at the federal and state lev - el, establish key principles to promote market integrity and prevent market abuse. Additionally, SROs such as FINRA also have similar rules. Some of the key principles include: • promoting laws and rules designed to ensure that market participants have equal access to markets and that pricing and trading practices are fair, transparent, and accurate; • requiring that all investors receive access to basic facts about an investment before buying it; • enforcing laws, regulations, and rules to detect, deter and prevent wrongdoing of all types, includ -
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