FalconX Requests SEC to Classify Single-Stock Perpetuals as Security-Based Swaps

FalconX Bravo submitted a proposal to the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) asking that cash‑settled perpetual contracts tied to a single security or a narrow‑based security index be treated as security‑based swaps under existing SEC rules.

Scope of the Request

The filing specifically targets contracts that fall outside the joint SEC‑CFTC security‑futures framework, including comparable products offered through decentralized finance (DeFi) protocols. The request does not cover Bitcoin perpetuals or crypto perpetuals more broadly.

Regulatory Implications

If classified as security‑based swaps, the contracts would be subject to SEC registration, business‑conduct standards, transaction‑reporting, capital and margin requirements, and segregation rules. Platforms facilitating such contracts could also fall within the security‑based swap execution framework, depending on their structure.

Proposed Regulatory Paths

FalconX outlines several pathways for cash‑settled equity perpetuals:

• Bilateral and over‑the‑counter transactions.
• Contracts offered by eligible venues or platforms authorized for security‑based swaps.
• Transactions on non‑U.S. venues.
• Comparable contracts on DeFi protocols.

Request for Relief from Duplicate Requirements

FalconX also seeks to amend Rule 18a‑10 to raise the combined‑notional threshold for alternative compliance from 10 % to 49 %, while retaining the fixed‑dollar cap, SEC registration, and oversight for aspects not covered by the relief.

Comments and Next Steps

An independent researcher, Amadeus Brandes, filed a comment on August 21 supporting a mixed‑swap approach that addresses insider‑information, manipulation, leverage, and funding‑rate risks. The comment period closes on August 24. The agencies have not yet adopted any policy based on these submissions.