PTG Responds to CFTC Conflicts and Affiliations Proposed Rulemaking
Oct 5, 2026
In a letter filed today, PTG supports the Commodity Futures Trading Commission’s (CFTC) effort to establish a consistent regulatory framework for conflicts arising from affiliations between exchanges and market participants, while arguing that affiliate principal trading creates a uniquely structural conflict of interest. PTG’s preferred approach is a prohibition on principal trading by an exchange affiliate because the exchange has an inherent economic interest in its affiliate’s trading that cannot be fully addressed through disclosure, information barriers, or governance controls. If the Commission retains an exception for affiliated market makers, PTG recommends significantly stronger safeguards, including quantitative market-making requirements, equal incentives for unaffiliated firms, order-priority subordination, independent oversight, point-of-transaction disclosure, and phased limits on affiliate trading. PTG also recommends excluding affiliated market makers entirely from request-for-quote, auction, combination, and package markets, where traditional order-priority protections are less effective.
More broadly, PTG argues that limiting affiliated trading would promote neutral market structure, independent liquidity provision, competition, and genuine price discovery, particularly in developing event-contract and economic-indicator markets. At the same time, the letter does not oppose vertical integration generally and supports preserving genuinely non-controlling minority investments in exchanges, provided that arrangements involving de facto control or preferential access remain subject to appropriate safeguards. PTG also supports the Commission’s broader governance, oversight, and disclosure framework, recommends extending protections to certain clearing and swap-execution-facility arrangements, identifies two drafting inconsistencies in proposed Regulation 38.852, and urges the Commission to account for the less-visible economic costs of affiliate trading, including deterred entry by independent liquidity providers, distorted exchange incentives, and lost end-user benefits from competitive bidding.