CFTC Provides Clarity on Commission’s FBOT Framework

If you enjoy cross-border derivatives regulation (and honestly, who doesn’t keep a framed copy of Part 48 on the wall?), 2025 delivered a surprisingly useful plot twist: the CFTC’s Division of Market Oversight issued Staff Advisory Letter 25-27 to reaffirm and clarify the Commission’s long-standing framework for foreign boards of trade (FBOTs). In plain English, the advisory helps answer a question that has created real confusion in recent years: when can a non-U.S. exchange provide direct access to traders in the United States, and what registration path applies?

The short answer: the CFTC is reminding the market that the FBOT framework under Part 48 remains the proper route for qualifying non-U.S. exchanges that are legally organized and operating outside the United States and want to provide direct market access to U.S.-located members or participants. It also reiterates that a properly registered FBOT does not need to become a designated contract market (DCM) just to provide that access. That sounds technical, but it is a big deal for market structure, compliance planning, and global derivatives accessespecially in digital asset markets.

What the CFTC Actually Clarified

The advisory is best understood as a “reset to the rulebook.” It does not invent a brand-new regime. Instead, it reaffirms the existing framework and explains how it applies today, including to newer business models and asset classes. Think of it as the regulator saying: “Everyone, please use the map we already published.”

1) The FBOT framework applies across asset classes

One of the most practical points is that the CFTC states the FBOT registration framework applies to all markets, regardless of asset class, including traditional and digital asset markets. That matters because many market participants have been trying to interpret older cross-border rules through the lens of newer crypto-related enforcement and market developments. The advisory provides a clearer signal that the framework is not limited to legacy futures products.

2) The key distinction is geographic location

The advisory emphasizes that the dividing line between the FBOT pathway and the domestic DCM framework is the geographic location of the board of trade, exchange, or market. If the exchange is organized and operating outside the United States, it may be eligible for FBOT registration under Part 48 (assuming it satisfies the requirements). If the exchange is located in the United States, the domestic DCM framework applies instead.

This point sounds obvious, but in practice it is where a lot of legal and compliance anxiety has been concentrated. The advisory directly addresses that ambiguity by reaffirming the Commission’s long-standing approach.

3) Registered FBOTs do not also need DCM registration for this purpose

The CFTC staff specifically states that an FBOT properly registered under Part 48 does not need to become a DCM in order to provide U.S.-located members or other participants with direct access to the FBOT’s electronic trading and order matching system. That clarification is central to the advisory and likely the reason this topic generated so much industry attention.

4) Direct access does not automatically trigger FCM registration for every offshore participant

The advisory also notes that providing such direct access would not, by itself, require a market participant located outside the United States to register with the CFTC as a futures commission merchant (FCM). That does not eliminate all intermediary or customer-facing registration questions, but it is an important clarification against overly broad readings of U.S. registration obligations.

5) The advisory is clarifyingbut not deregulating everything

This is where the fine print matters. The CFTC staff also cautions that the advisory does not address every circumstance in which a contract must be traded on a DCM. A key example is retail swaps. If a product is a swap under U.S. law and the customer is not an eligible contract participant (ECP), separate U.S. statutory and regulatory limitations may apply. In other words, FBOT registration is a pathway, not a universal “get out of classification free” card.

What Is an FBOT, and Why Part 48 Exists

A foreign board of trade (FBOT) is generally a board of trade, exchange, or market located outside the United States. The modern CFTC registration framework for FBOTs lives in Part 48 of the Commission’s regulations and governs when and how certain non-U.S. exchanges can provide direct access to U.S.-located participants.

The framework has roots in an older no-action process used by the CFTC staff for many years. Before Part 48 was adopted, non-U.S. exchanges often operated under direct-access no-action letters. After Dodd-Frank, the Commission adopted formal rules in 2011 to establish a registration system for FBOTs seeking to provide direct access to members or participants in the United States. In short: what used to be handled through staff letters became a codified regulatory process.

The Dodd-Frank connection

The statutory anchor is section 4(b) of the Commodity Exchange Act (CEA), as amended by Dodd-Frank (section 738). That amendment gave the CFTC authority to adopt rules requiring certain FBOTs to register if they want to provide direct access to U.S.-located participants. The 2011 rulemaking then translated that authority into the Part 48 framework used today.

Why This Advisory Matters Now

Timing matters in regulation, and this advisory arrived at a moment when market participants were asking very practical questions: Can a non-U.S. platform serve U.S.-located participants? Does it need to become a DCM? Does the answer change if the products involve digital assets? Does historical practice still matter?

The CFTC’s 2025 advisory responds to increased inquiries and recent confusion over the correct registration pathway. It also lands in a broader policy environment where regulators are under pressure to provide clearer rules for digital asset market structure without relying solely on case-by-case enforcement. Even when firms disagree about policy direction, most can agree on one thing: uncertainty is expensive. Lawyers bill by the hour, but confusion bills by the month.

Clarity supports market access and compliance planning

For non-U.S. exchanges, the advisory helps frame the compliance roadmap: if the platform is genuinely foreign and wants to offer direct access to U.S.-located participants, Part 48 is the place to start. For U.S. trading firms, brokers, and compliance teams, it provides a more stable basis for assessing whether access to a non-U.S. venue can be structured within an established CFTC framework.

That does not mean approvals are automatic or easy. The advisory and industry commentary consistently stress that FBOT registration is subject to eligibility requirements and ongoing conditions. But “difficult and rule-based” is still much better than “unclear and guessed at.”

Key Requirements and Limits Under the FBOT Framework

The advisory is a reminder, not a waiver. Part 48 still includes procedures, requirements, and conditions that matter. A foreign exchange seeking FBOT registration must satisfy eligibility standards, and those standards are designed to ensure the venue is subject to meaningful non-U.S. regulation and oversight.

Eligibility is not automatic

Industry summaries of the advisory highlight the same core message: a non-U.S. exchange must be eligible and then registered. The framework expects an established, organized exchange with appropriate rules, market integrity protections, and regulatory oversight in its home jurisdiction. It is not a “fill out one form and collect your U.S. access badge” process.

Permitted direct access categories still matter

The categories of U.S.-located members or participants who may access a registered FBOT remain important. In broad terms (and subject to conditions), the framework contemplates proprietary trading participants, registered FCMs trading for customers, certain CPOs/CTAs (or exempt CPOs/CTAs) for relevant U.S. pools or customer accounts, and registered introducing brokers.

That list matters operationally. Compliance teams should map each access model to the relevant Part 48 condition, account type, and guarantee/clearing arrangements. “They’re a U.S. customer” is not a legal category; it is the beginning of a due-diligence questionnaire.

Retail swaps remain a red-line issue

The advisory’s caution about retail swaps is one of the most important “don’t skip this part” sections. If a derivative offered on a non-U.S. venue is treated as a swap under U.S. law, and the user is not an ECP, the product may be subject to rules that require execution on or subject to the rules of a DCM. FBOT registration alone does not override that framework.

This is especially relevant for digital asset firms because product labeling in one jurisdiction may not line up cleanly with U.S. regulatory classification. Calling something a “perp” or a “derivative product” in marketing copy does not answer the legal classification question. (If only it did, half of compliance could be handled by brand strategy teams.)

The 2024 Part 48 Amendments Set the Stage

Another reason the 2025 advisory feels more concrete is that the CFTC updated Part 48 in 2024. The Commission amended the rules to permit registered FBOTs to provide direct access to eligible introducing brokers (IBs) in the United States for submission of customer orders, established a process for FBOTs to request revocation of registration, and removed outdated references tied to older no-action relief.

That 2024 modernization matters because it reflects how intermediary roles and execution practices evolved since the original 2011 rules. In practical terms, the advisory and the amended rule framework now work together: the 2024 amendments updated the plumbing, and the 2025 advisory reminded everyone which pipes connect to which buildings.

Practical Examples of What This Means

Example 1: Non-U.S. derivatives venue with U.S. proprietary traders

A non-U.S. exchange that is legally organized and operating abroad wants to allow certain U.S.-located proprietary trading firms to access its electronic order book. The advisory supports analyzing that access through the FBOT registration framework (Part 48), not by default assuming the venue must register as a U.S. DCM. The exchange would still need to satisfy FBOT eligibility and registration conditions.

Example 2: Offshore platform expanding customer access via an intermediary

A registered FBOT wants to permit a U.S.-registered IB to submit customer orders to the FBOT’s system. The 2024 amendments are highly relevant here because they expressly addressed IB access (subject to conditions and clearing guarantees). The advisory reinforces that the Commission’s FBOT framework remains the governing pathway for this type of structure.

Example 3: Digital asset product marketed globally, but offered to U.S. retail users

Even if the venue is offshore and exploring the FBOT route, the analysis cannot stop there. If the product is a swap under U.S. law and the intended users are non-ECP retail participants, the advisory itself warns that other U.S. trading requirements may apply. This is where product classification, customer categorization, and market-access design must be reviewed togetherbefore launch, not after the launch party.

What Businesses Should Do Next

For non-U.S. exchanges

• Assess whether your exchange is genuinely organized and operating outside the United States.
• Map your U.S.-access strategy to Part 48 registration eligibility and conditions.
• Review participant categories (proprietary, FCM, CPO/CTA, IB) and access permissions.
• Evaluate product classification issues, especially for digital asset derivatives and swaps.
• Document home-jurisdiction oversight and information-sharing expectations relevant to CFTC review.

For U.S.-based trading firms and intermediaries

• Confirm the venue’s registration status and scope of permitted access.
• Verify account-type restrictions and customer onboarding controls.
• Review clearing and guarantee arrangements where required.
• Coordinate legal, compliance, and operations teams before expanding market access.

For in-house legal and compliance teams

Treat the advisory as a framework clarification, not a substitute for a full jurisdictional analysis. It helps answer the “which lane?” question (FBOT vs. DCM), but firms still need to answer the “which vehicle, what cargo, and who’s driving?” questions. In derivatives compliance, details are not decorationsthey are the whole building.

Conclusion

The CFTC’s advisory on the Commission’s FBOT framework is significant because it restores practical clarity to a long-standing cross-border registration pathway at a time of rapid market evolution. It confirms that the Part 48 FBOT regime remains available for qualifying non-U.S. exchanges seeking to provide direct access to U.S.-located participants, including in digital asset markets, and reiterates that registered FBOTs do not need to register as DCMs solely for that purpose.

At the same time, the advisory does not erase existing limitsespecially around product classification and retail swaps. The result is not “anything goes,” but something far more useful: a clearer regulatory map. And in global derivatives regulation, a good map can save a company years of detours.

Experience-Based Scenarios and Practical Lessons (Extended Section)

The following experience-based observations are composite, illustrative scenarios drawn from common market-structure and compliance patterns (not legal advice and not descriptions of any single firm). They are included to make the practical impact of the FBOT clarification easier to understand.

In one common scenario, an offshore exchange team spends months debating whether it should build a U.S. compliance strategy around a DCM application, an FBOT registration analysis, or a complete U.S. shutdown. The legal team says one thing, business development says another, and the product teamunderstandablyjust wants to know whether it can ship features this quarter. The 2025 advisory helps break that deadlock by reaffirming the threshold question: if the exchange is actually located outside the United States and seeks direct access for U.S.-located participants, the FBOT framework is the relevant starting point. That single clarification can save enormous internal churn.

Another recurring experience involves the “everyone uses the same words, but means different things” problem. A trading venue may call participants “members,” “clients,” “sub-accounts,” or “API partners,” while U.S. rules focus on categories like proprietary traders, FCMs, IBs, CPOs, and CTAs. When firms map their commercial labels to regulatory categories, they often discover that their onboarding workflow asks the wrong questions. Teams that adapt quickly usually create a permissions matrix tying participant type, account type, product type, and order-routing method to specific compliance controls. It is not glamorous, but it is where regulatory clarity becomes operational clarity.

A third practical lesson shows up in digital asset markets: product classification risk can outrun platform engineering. An exchange might build a technically elegant product with robust risk controls and deep liquidity, yet still face a major U.S. access issue if the product is classified differently under U.S. law than under local market practice. The advisory’s retail swaps caution is important precisely because it reminds teams not to confuse venue registration status with product-level permissibility. Smart firms now run a “two-track review”: one track for venue status (FBOT/Part 48), another for product classification and customer eligibility (including ECP analysis).

Finally, compliance teams consistently report that regulator-facing documentation quality makes a real difference. Firms that approach FBOT questions with organized recordshome regulator oversight evidence, participant eligibility controls, supervisory procedures, and escalation protocolsmove from abstract debates to concrete answers much faster. In contrast, firms that rely on slide decks full of buzzwords (“global,” “decentralized,” “frictionless,” “next-gen”) usually discover that none of those words appears in the part of the rulebook that matters. The experience takeaway is simple: the CFTC’s clarification is valuable, but the firms that benefit most will be the ones that translate it into disciplined governance, clean participant segmentation, and product-by-product legal review.