How Does the Regulatory Classification of a Derivative (E.g. Security Vs. Commodity) Affect Custody Requirements? ⎊ Path

How Does the Regulatory Classification of a Derivative (E.g. Security Vs. Commodity) Affect Custody Requirements?

The regulatory classification significantly impacts custody requirements. Derivatives classified as commodities (like most crypto futures in the US) typically fall under CFTC rules, which may have specific requirements for segregated accounts and collateral handling.

Derivatives classified as securities would fall under SEC rules, imposing different, often stricter, requirements, including the use of qualified custodians. The classification determines the applicable regulatory framework for asset safety.

What Is the Regulatory Difference between a ‘Security’ and a ‘Commodity’ Derivative in the US?

How Does the “Howey Test” Determine If a Crypto Derivative Falls under SEC or CFTC Jurisdiction?

What Is the Role of the CFTC versus the SEC in Regulating Crypto Derivatives?

How Does the SEC’s View on Digital Assets Affect Custody Rules?

What Are the Implications of a “Security” Vs. “Commodity” Classification for a Crypto Derivative Product?

How Does the “Major Non-Financial Asset” Status Affect SEC Vs. CFTC Jurisdiction?

How Does the SEC’S Approach to Crypto Regulation Compare to the CFTC’s?

What Is the Regulatory Difference between a Futures Contract on a Security and a Futures Contract on a Commodity?

Glossar

Segregated Accounts

Account ⎊ Segregated accounts, within the context of cryptocurrency, options trading, and financial derivatives, represent a distinct allocation strategy designed to isolate assets or funds from broader operational or trading activities.

Regulatory Classification

Categorization ⎊ Regulatory classification refers to the process by which governmental bodies and financial authorities define the legal and operational status of financial instruments, assets, or services.