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Treasury Clearing: SEC Narrows Treasury Repo Clearing Mandate
To start, the December 31, 2026 cash date and the cash obligations remain unchanged. However, on October 30, the SEC took two categories of Treasury repo out of the clearing mandate ahead of the June 30, 2027 repo compliance date. Release No. 34-106789 is limited to repo and responds to requests from the IIB and SIFMA, removes them from the Rule 17ad-22(a) definition of “eligible secondary market transaction.”
Covered trades are uncleared repo between a non-U.S. booking entity and a Non-U.S. Client. The booking entity can be a Non-U.S. Participant, a non-U.S. affiliate, or a foreign branch of a U.S. direct participant. “U.S. person” follows Exchange Act Rule 3a71-3, and counterparties guaranteed by a U.S. person do not count as Non-U.S. Clients.
The "firm" means the direct participant plus its consolidated affiliates. It must pass one of two tests, each measured as a rolling daily average over the prior three quarters:
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Percentage cap. Qualifying repo divided by the sum of cleared non-affiliate repo and qualifying repo. The cap is 25% from June 30, 2027, 20% from July 1, 2028, 15% from July 1, 2029 and 10% after June 30, 2030.
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Fixed dollar. Qualifying repo stays under $5 billion.
Cleared repo with counterparties outside the mandate, such as central banks, sovereigns and natural persons, counts in the denominator. Voluntary clearing will add headroom to the cap. The direct participant attests compliance to each Treasury CCA where it is a member. If it falls out of compliance, it must notify each CCA immediately and either give a plan to return to compliance or stop relying on the exemption.
Repo with an affiliate now qualifies whenever the affiliate meets the majority-ownership and consolidation tests. The affiliate no longer has to be a bank, broker, dealer or FCM. Investment companies are excluded, whether registered or not.
Barrett Morris | Email
Enforcement Round-Up
Court Orders More Than $288 Million Against EminiFX and Its Founder
What Happened. On October 19, the CFTC announced the U.S. District Court for the Southern District of New York entered orders granting the CFTC’s motions for summary judgment, injunctive relief, and a civil monetary penalty against Eddy Alexandre and EminiFX Inc., resolving the CFTC’s May 12, 2022 complaint. The court found that EminiFX marketed itself as a technology-driven “investment club” offering cryptocurrency and forex trading, raised more than $262 million from tens of thousands of investors over eight months, and reported weekly returns of 5% to 9.99%. It instead sustained net losses exceeding $49 million, including at least $15 million misappropriated by Alexandre, in what the court described as a Ponzi scheme. The orders require $228,576,962 in restitution, $15,049,500 in disgorgement
(offset by restitution paid), and a $45,148,500 civil penalty. As of July 2026, the court-appointed receiver had returned more than $98 million to over 28,000 investors. Alexandre is serving 9 years in prison based on a parallel Southern District of New York criminal case.
Why It Matters. The ruling applies established fraud principles to a purported crypto-and-forex investment pool through summary judgment, rather than default or consent. The financial consequences are also significant: the $45,148,500 civil penalty is three times the $15,049,500 in unlawful gains ordered disgorged, underscoring how gain-based penalties can substantially increase exposure beyond restitution and disgorgement.
Practical Takeaways.
- Claims of unusually high, consistently positive weekly returns are a fraud red flag that may warrant escalation by intermediaries and banking partners handling the funds.
- An “investment club” or membership label does not itself exempt a vehicle from commodity pool requirements; the instruments traded, activities conducted, and any available exemptions matter.
- Receivership recoveries can be meaningful, but the CFTC itself cautions that restitution orders do not guarantee that victims will be made whole.
Louisiana Forex Operator Ordered to Pay More Than $9 Million
What Happened. On October 21, the CFTC announced a default judgment against Michael B. DePetrillo, Meteor LLC, and NOLA FX Capital Management LLC in the Eastern District of Louisiana, resolving its 2024 complaint. The court found that the defendants fraudulently solicited and misappropriated more than $3 million, misrepresented how retail forex funds would be used and trading profitability, and issued false account statements to conceal their misconduct. The defendants used investor funds to pay earlier participants, cover DePetrillo’s personal expenses, and trade in his personal account. The court imposed a $9,211,492 civil penalty, permanent injunctions, and permanent trading and registration bans. In the related criminal case, DePetrillo pleaded guilty to violating the Commodity Exchange Act (CEA) on
February 18, 2025, and was subsequently sentenced to 9 years in prison and ordered to pay $6,748,412 in restitution.
Why It Matters. The case underscores that a criminal conviction and restitution order do not necessarily end enforcement exposure. The CFTC’s separate action resulted in an additional $9.2 million civil penalty and permanent trading and registration bans, adding both financial consequences and lasting restrictions on participation in CFTC-regulated markets.
Practical Takeaways.
- Discrepancies between customer account statements and custodial or trading records can be warning signs of fraud; reported balances and returns alone may not provide a reliable picture.
- A related criminal case does not eliminate the consequences of default in a civil action, which can leave liability allegations uncontested and result in substantial penalties and permanent bans.
- Parallel proceedings create overlapping strategic considerations: statements, document productions, and settlement decisions in one may affect the other.
ICE Futures U.S. Settles Six Matters in a Single Day
What Happened. On October 7, a subcommittee of the ICE Futures U.S. Business Conduct Committee resolved 6 disciplinary matters by settlement. Each respondent neither admitted nor denied the alleged violations, and the notices identified no customer harm. Monetary sanctions across the 6 matters totaled $808,390: $715,000 in fines and $93,390 in disgorgement.
| Firm |
Summary of Alleged Violations/Conduct |
Product(s) |
Penalty |
| Axiom Markets LLC |
Established a spot-month position exceeding the applicable speculative position limit on an interday basis on September 25, 2026 (Rule 6.20(b)); supervisory failures (Rule 4.01(b)). |
Henry LD1 Fixed Price Future |
$20,000 fine plus $93,390 disgorgement |
| StoneX Financial Inc. |
From November 2023 through November 2024, at its client’s direction, submitted EFPs between accounts with common beneficial ownership, resulting in wash trades (Rule 4.02(c)); failure to supervise and inadequate supervisory systems (Rules 4.01(a), 4.01(b)). |
Cotton No. 2 |
$35,000 fine |
| StoneX Comércio e Exportação de Commodities Ltda. (f/k/a CDI-Brazil) |
From November 2023 through November 2024, executed EFPs opposite an affiliate without demonstrating independent control over the accounts, resulting in wash trades (Rules 4.06(b)(iv), 4.02(c)); supervisory failures (Rules 4.01(a), 4.01(b)). |
Cotton No. 2 |
$80,000 fine |
| StoneX Switzerland S.A. (f/k/a CDI-Swiss) |
Same conduct and period as CDI-Brazil: affiliate EFPs without demonstrated independent control, resulting in wash trades (Rules 4.06(b)(iv), 4.02(c)); supervisory failures (Rules 4.01(a), 4.01(b)). |
Cotton No. 2 |
$80,000 fine |
| Barclays Capital Inc. |
From January 1, 2025, through March 31, 2026, failed to accurately assign and populate the Manual Order Identifier (Tag 1028) on numerous orders (Rule 4.19(c)(i)); supervisory failures (Rule 4.01(b)). |
Coffee “C” Futures, Cocoa Futures, MSCI Futures |
$125,000 fine |
| Macquarie Bank Limited |
For an extended period, failed to submit accurate large trader positions for certain client accounts (Rule 6.15(a)); supervisory failures (Rule 4.01(b)). |
Various Energy Contracts |
$375,000 fine |
Why It Matters. These settlements highlight enforcement exposure beyond manipulative trading: Barclays and Macquarie received the two largest fines for order-tagging and large trader reporting failures. The StoneX matters extended to both the broker submitting affiliate EFPs and the counterparties, while all six settlements included alleged supervisory-systems violations under Rule 4.01(b). Together, the matters show how transaction-level and operational failures can raise broader questions about the controls behind them.
Practical Takeaways.
- For affiliate EFPs, evidence of independent account control is central to compliance with Rule 4.06(b)(iv). Common ownership and client instructions do not substitute for satisfying the applicable requirements.
- Order-tagging and reporting controls depend on reliable source data and accurate transmission to the exchange; position-limit controls also depend on contract-specific limits and measurement periods.
- The strength of a supervisory framework depends on effective implementation, not just written policies. Testing results, escalation records, and documented follow-through can help demonstrate how controls operate in practice.
What About CME Group?
Cornerstone Research’s Trends in CME Group Disciplinary Notices: 2018–2025 reports steady recent notice volume but lower penalties in 2025. Notices fell 55% from 2019 to 2022, rebounded 80% in 2023, and remained near that level: 124 in 2023, 120 in 2024, and 127 in 2025. Aggregate monetary penalties in 2025 were the study period’s second-lowest, above only 2021. The median nonzero fine was $25,000, versus an average annual median of $40,000 for 2018–2024. Notices citing Disruptive Practices Prohibited fell to seven, with associated fines dropping from $1.58 million in 2024 to $330,000 in 2025. Providing and Keeping Records led all categories with 31 notices. Although the report ends December 31, 2025, CME Group enforcement has continued this year, including a settlement effective September 8, 2026 with StoneX Financial Inc. over reporting failures across all four CME Group exchanges.
Our take. Lower penalties offer limited reassurance when enforcement activity remains steady. The CME Group data and ICE settlements underscore that exchange enforcement extends beyond trading conduct to the accuracy of reporting, adequacy of records, and effectiveness of supervision.
Tiffany Payne and Nader Raja | Email
OCC Finalizes Its GENIUS Act Rule
On October 21, 2026, the OCC finalized its GENIUS Act rule, the first comprehensive final rule any agency has issued under the Act. It takes effect with the statute on January 18, 2027.
The final rule trades hard numbers for examiner judgment. Liquidity floors were cut, the automatic redemption extension is gone, and the yield presumption was dropped. In their place come stress testing, case-by-case anti-evasion review, and broad OCC discretion.
For derivatives and collateral desks, four items matter most: a new express power to manage FX risk, favorable treatment of centrally cleared repo, a ban on rehypothecating reserves, and a new path to put reserves in trust or under a security interest. More on this below.
Most of the rule sits in a new 12 CFR Part 15, with conforming changes to Parts 3 (capital), 6 (prompt corrective action), 8 (fees) and 19 (practice and procedure). Two companion bulletins came out the same day: 2026-51 on applications and waivers, and 2026-52 on reporting forms.
Who is covered. Part 15 reaches six groups (Bulletin 2026-50):
- national banks and their subsidiaries;
- Federal savings associations and their subsidiaries;
- Federal branches and their subsidiaries;
- foreign payment stablecoin issuers;
- nonbanks that seek, or hold, approval as Federal qualified payment stablecoin issuers; and
- State qualified issuers over which the OCC has authority.
Insured banks and FSAs must issue through a subsidiary. Uninsured national banks and Federal branches can issue directly. Banks that custody stablecoins, reserves or other covered assets are also pulled in through Subpart C.
Why it matters on the derivatives desk
1. FX hedging is now an express power. Section 15.10 is a closed list of activities, and the final rule adds “managing foreign exchange risk”. That gives issuers with non-USD flows a clear hook for FX forwards and swaps. However, the rule does not name interest rate hedging, even though issuers must stress test reserves against significant positive rate scenarios. Our read: rate hedges will have to fit under “managing reserves” or the catch-all for activities that directly support the core four. We expect that question in exams and in ISDA onboarding.
2. Cleared repo gets a concentration break. Overnight Treasury repo and reverse repo remain eligible reserves, and centrally cleared repo is carved out of the 40% single-counterparty cap. Bilateral repo still counts toward the cap, so sponsored or done-away clearing access becomes a reserve-management tool.
3. Reserves cannot be rehypothecated. Issuers may not pledge, rehypothecate or reuse reserves, except for repo margin, custody, or redemption liquidity. Reading between the lines, an issuer cannot post reserves as variation or initial margin on a hedge. Hedge margin has to come from non-reserve assets, and counterparties should diligence where it comes from.
4. Reserves can sit in trust or under a security interest. The new trust activity allows a security interest in reserves only if it benefits holders alone, does not impair redemption, creates no competing bankruptcy claims, and lets a receiver promptly transfer or liquidate. Any lender, dealer or repo counterparty looking for a lien on reserves will be structurally subordinated to stablecoin holders.
5. Collateral schedules need a definition check. CFTC staff already let FCMs accept payment stablecoins as customer margin under a pilot (Staff Letters 25-39 and 25-40, December 8, 2025). The OCC rule now sets which tokens qualify: a “wrapped” stablecoin redeemable for another stablecoin, not money, is not itself a payment stablecoin. CSAs and margin schedules that list stablecoins as eligible collateral should key off issuance by a permitted payment stablecoin issuer and say how wrapped tokens are treated.
Structured finance and distribution angles
- SPV issuers are welcome. The OCC changed the final rule to accommodate SPV issuers built to protect holders, and expects streamlined licensing for SPVs tied to existing issuers. Bankruptcy-remoteness work (true-sale and non-consolidation opinions, separateness covenants) should move to the center of issuer structuring.
- Bank Holding Company Act control tests apply. “Affiliate” and “control” track the BHC Act, and the OCC will read them consistent with Regulation Y, including the 25% voting threshold and controlling-influence factors. Sponsors, equity holders and service providers in an SPV can become affiliates, which matters for the yield ban's anti-evasion review.
- Distributors own the customer until redemption. A buyer from a third-party or white-label distributor is not the issuer's “customer” until it asks the issuer to redeem. Distribution agreements need to allocate disclosures, notices and onboarding accordingly.
- Custodian diligence is on the issuer. Each reserve custodian must document compliance with Act § 10. The OCC will not publish a list of eligible institutions. A PPSI can exceed the 40% cap with one custodian if it identifies itself to the custodian, gets a § 10 commitment, and monitors.
- Where reserves can sit. Uninsured deposits at insured banks count as reserves. Deposits at uninsured U.S. branches and agencies of foreign banks do not, though those branches can act as custodians.
- Securities stay out. A security cannot be a payment stablecoin, so tokenized notes, fund interests and ABS-style tokens fall outside Part 15. Design-stage classification decides the regulator.
Barrett Morris | Email
Prediction Market Update
The CFTC Draws Its Own Line Between a Swap and a Bet
What Happened. On October 9, the CFTC announced two coordinated rule-making actions. It issued an Interim Final Rule (IFR) excluding qualifying casino-style gambling products from the “swap” definition (91 FR 65969). The exclusion generally covers products offered within the scope of a provider’s state or tribal gambling authorization, provided they are neither traded among multiple participants on an exchange or other market nor individually negotiated. Products outside the exclusion must still be evaluated separately to determine whether they meet the swap definition. Separately, the CFTC proposed expressly including event contracts based on sports, politics, culture, and weather in the definition of swap (91 FR 66022). Both were published October 19. The IFR took effect that day; comments on both are due by November 18.
Why It Matters. The actions seek to draw a clearer line between licensed gambling and exchange-traded event contracts as courts disagree over swap status and federal preemption. A final inclusion rule could bolster arguments by the CFTC and designated contract markets (DCMs) for federal oversight, but would remain subject to statutory limits and judicial review. And, neither settles whether particular state laws are preempted.
The NBA Joins MLB and the NHL
What Happened. On October 26, the CFTC and the NBA announced a Memorandum of Understanding (MOU) to share information and protect the integrity of professional basketball in prediction markets. The NBA is the third league to sign, following MLB (March 19, the first of its kind) and the NHL (May 21).
Why It Matters & How It Compares. The NBA MOU extends the CFTC’s league-cooperation framework to basketball, creating a direct channel to share information about risks such as insider trading and manipulation. Like the MLB and NHL MOUs, it provides for designated contacts, ongoing consultation, and confidential information sharing without creating binding obligations or changing the CFTC’s enforcement authority. Information sharing under the NBA agreement is discretionary, and restrictions on onward disclosure mean teams do not automatically receive CFTC information. These professional
sports-league MOUs are distinct from the leagues’ commercial platform agreements: MLB partnered with Polymarket, while the NHL and NBA partnered with both Kalshi and Polymarket.
Could the NFL Be Next? The NFL’s recent position suggests a near-term agreement is uncertain. Its October 8 amicus brief supporting U.S. Supreme Court review in Flaherty v. KalshiEX argues that sports event contracts are gambling, not swaps, and favors state oversight. The league has publicly stated that CFTC resource constraints favor state regulation and criticized the agency and platforms for not adopting requested safeguards. Still, cooperation on integrity need not concede the jurisdictional issue. The NFL’s importance to trading volume— its brief states that NFL-related contracts accounted for $1.8 billion of the $3.3 billion in total prediction-market trading volume on the first Sunday of the 2026 season—creates reasons for potential engagement with the CFTC. And, court developments or implementation of additional safeguards could affect its approach.
Why It Matters. League MOUs provide a framework for addressing integrity risks, but their effectiveness depends on how information is shared and acted upon. They neither establish that federal oversight is adequate nor resolve the jurisdictional disputes in state litigation.
Utah Goes Criminal, and the CFTC Goes to Court
What Happened. The Utah dispute over prediction markets quickly escalated from civil enforcement to criminal charges. On October 20, Utah Attorney General Derek Brown sued Kalshi and two Susquehanna entities in Salt Lake County. On October 27, the United States and CFTC sued Utah in federal court (Case No. 2:26-cv-01055), seeking to block state enforcement and related investigations on federal preemption grounds, adding to the CFTC’s nine other similar lawsuits against various states around the country. On October 28, Utah filed criminal charges against KalshiEX LLC and co-founders Tarek Mansour and Luana Lopes Lara alleging: one count of pattern of unlawful activity (a second-degree felony), 12 counts of online gambling promotion (third-degree felonies), and one count of general gambling promotion (a Class A misdemeanor). The charges appear to stem from 12 sports transactions an undercover agent allegedly placed in September using an account tied to Utah location information. Kalshi denies wrongdoing, calling the charges “a crazy overreach.”
Why It Matters. Utah’s outright gambling ban and a federal ruling rejecting Kalshi’s preemption claim sharpen the stakes of the dispute. In KalshiEX LLC v. Cox (D. Utah), Judge Robert J. Shelby granted summary judgment to state officials on August 4, 2026, rejecting Kalshi’s argument that the CEA preempts enforcement of Utah’s gambling laws. The United States and CFTC now seek to block state enforcement, but filing their suit does not suspend those proceedings. With injunctive relief still contested, the co-founders face personal criminal exposure while the jurisdictional dispute
continues.
Illinois Blocked, Mostly
What Happened. On October 2, Judge Martha Pacold of the Northern District of Illinois granted preliminary-injunction requests in part in related actions involving Kalshi, Coinbase, and the CFTC. She concluded that the plaintiffs were likely to succeed in challenging several state licensing and gambling provisions, including age, geographic, and sports-offering restrictions, as preempted by federal law. The court directed the parties to submit proposed injunction terms by October 29. It reserved the challenge to Illinois’ exchange-wager transaction tax for further argument. That tax is 1.75% of each covered wager, increasing to 3.5% after five million exchange wagers in a fiscal year. On November 2, the Court entered its Memorandum and Opinion.
Why It Matters. The ruling supports the plaintiffs’ preemption position at the preliminary-injunction stage, but neither finally resolves the merits nor binds the Seventh Circuit. The tax question remains open; reserving it does not signal approval of the levy or state taxation more broadly. Conflicting appellate decisions leave the broader jurisdictional dispute unresolved and heighten the significance of whether the Supreme Court takes up the issue.
Barrett Morris and Tiffany Payne | Email
Interesting Links
Places We’ll Be
ISDA’s Annual Legal Forum on November 5
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