Yesterday, I addressed the efforts toward harmonization between the SEC and the CFTC, which may ultimately lead to cohabitation of the two agencies at the SEC’s Station Place headquarters, and later that day the SEC and the CFTC announced the signing of a historic Memorandum of Understanding to guide their coordination and collaboration. The announcement states:

The Securities and Exchange Commission and the Commodity Futures Trading Commission today announced that they have entered into a Memorandum of Understanding (MOU) to guide coordination and collaboration between the two agencies to support lawful innovation, uphold market integrity, and ensure investor and customer protection. The MOU reflects both agencies’ commitment to provide fair notice to market participants, respect individual liberty, and foster lawful innovation with the minimum effective dose of regulation to enhance U.S. competitiveness in finance.

“For decades, regulatory turf wars, duplicative agency registrations, and different sets of regulations between the SEC and CFTC have stifled innovation and pushed market participants to other jurisdictions,” said SEC Chairman Paul S. Atkins. “This updated Memorandum of Understanding will serve as a roadmap for a new era of harmonization between the agencies – one that is critical to support U.S. leadership in this next chapter of financial innovation. By aligning regulatory definitions, coordinating oversight, and facilitating seamless, secure data sharing between agencies, we will ensure our rules and regulations deliver the clarity market participants deserve.”

“America’s financial markets are the envy of the world because they scale and adapt to meet investor demands. Like our markets, the CFTC’s and SEC’s regulatory frameworks must also evolve and modernize to accommodate the needs of our market participants,” said CFTC Chairman Michael S. Selig. “This Memorandum of Understanding solidifies the agencies’ commitment to harmonize regulatory frameworks to provide comprehensive and seamless financial market oversight. By working together, we’ll eliminate duplicative, burdensome rules and close gaps in regulation for the benefit of all Americans and usher in a Golden Age of American finance.”

The MOU outlines four ways in which the agencies will work together “to clarify, coordinate, and harmonize policies and practices wherever feasible and relevant:”

– Providing regulatory clarity and certainty built on technology-neutral regulations, frameworks that account for emerging technologies, transparent decision-making, and well-defined regulatory boundaries;

– Sharing information and data concerning issues of common regulatory interest to fulfill their respective regulatory mandates, including, but not limited to, in connection with a specific incident, event, or activity;

– Closely coordinating and cooperating to remove obstacles where appropriate, to the lawful introduction of novel derivative products, crypto asset products, or other products to market participants, customers, and investors; and

– Enhancing the functioning of the underlying markets.

The announcement also notes the establishment of a Joint Harmonization Initiative that “will support coordination across the policymaking, examination and enforcement functions of each agency, particularly for joint applications and shared policy efforts,” including:

– Clarifying product definitions through joint interpretations and rulemakings.

– Modernizing clearing, margin, and collateral frameworks.

– Reducing frictions for dually registered exchanges, trading venues, and intermediaries.

– Providing a fit-for-purpose regulatory framework for crypto assets and other emerging technologies.

– Streamlining regulatory reporting for trade data, funds, and intermediaries.

– Coordinating cross-market examinations, economic analyses, risk monitoring, surveillance, and enforcement.

The Joint Harmonization Initiative will be co-led by Robert Teply from the SEC and Meghan Tente from the CFTC.

– Dave Lynn