US Futures Trading Regulator is Re-classifying Retail Investors

• The CFTC may be redefining who a retail investor is to capture high and low earners.
• CFTC boss said the current definition is too broad to encompass below $50k and above $1M earners.
• The CFTC intends to issue a formal proposal and solicit public input.

Christy Goldsmith Romero, the Commodities Futures Trading (CFTC) commissioner, announced at a financial conference on Friday that her organization is proposing a new definition of a retail investor.

Romero stated that the move was to separate domestic, professional, and high net-worth retail into individual groups so that regulatory rules could better target each set.

According to a report, the CFTC currently defines a retail customer as a person whose total assets do not exceed $10 or $5 million if the person engages in a transaction, agreement, or contract to manage risk. The commissioner argued that such a definition is so broad that it encompasses those earning less than $50,000 and those making millions.

In her words:

I propose we break that definition of retail in two and then target rules to regular household people that may not be needed for a hedge fund or a millionaire. There’s a great opportunity to expand access to financial markets

She added, “If we continue to think of retail as including hedge funds, we’re not targeting our customer protection in a way that will be safe and affordable.”

Notably, the CFTC commissioner stated that President Joe Biden’s executive order on financial inclusion inspired her to increase ordinary people’s access to financial markets. The CFTC intends to issue a formal proposal soon and will solicit suggestions from the general public and decision-makers on what a new definition should entail.

Following the market’s fall last spring, Washington legislators and regulators now pay closer attention to crypto. Meanwhile, a White House report on digital assets suggested that 16% of Americans have acquired digital assets.