Fintech
American retail traders are set to gain leveraged exposure to individual stocks with less margin than European rules permit for similar trades. According to FM Intelligence, the US margin floor is 15% of a position’s value, while the EU and UK require 20%. Three exchanges have recently filed to list such contracts. Coinbase Derivatives submitted Form 1-N with the SEC on September 1, Bitnomial on September 4, and North American Derivatives Exchange (Crypto.com Derivatives North America) on September 14. These filings came within weeks of each other and followed Kalshi’s 58 equity-linked contracts. The disparity is significant because the European figure comes with additional protections. A single-stock contract for difference sold to EU or UK retail clients includes leverage caps, margin close-out rules, negative balance protection, a standardized risk warning, and a ban on trading incentives. None of these apply to US security futures. Yet the products are economically similar: cash-settled, no expiry, and financed by periodic payments between parties. The US floor was set in December 2020 when the SEC and CFTC reduced margin on unhedged security futures from 20% to 15% of market value. At that time, no venue listed the product. In Europe, the classification was clarified in February when the European Securities and Markets Authority stated that commercial names like ‘perpetual futures’ are irrelevant for classification, bringing such products under the CFD rulebook and its intervention package. For crypto perpetuals in Europe, this meant leverage dropping from 10x to 2x. Form 1-N is a notice registration under Section 6(g) of the Exchange Act, available to CFTC-designated contract markets listing only security futures. It takes effect upon filing. Bitnomial’s proposed rule change on September 18 describes itself as notice-registered under that section, with its first single-stock perpetual futures to run through CFTC product applications under Regulation 41.23(b).
These filings do not bypass the SEC; they register under a framework Congress created in 2000 for security futures, which fell into disuse after OneChicago closed in 2020. The filings coincided with other developments. On September 17, the SEC granted eToro USA Securities and Alpaca Securities relief for accounts holding no customer cash, noting that funds at outside banks are not SIPC-covered. The same day, the Commission issued a five-year conditional exemption for venues trading tokenized US-listed stock. NYSE Arca seeks to list binary options on company performance indicators for issuers above $3 billion market value, with comments closing October 9. CME Group listed quarterly single-stock futures in July. For brokers outside the US, the comparison is clear: a retail single-stock book under EU or UK rules requires 20% initial margin, now above the US benchmark. The margin number could change. CME Group sued the CFTC and its chairman in June, arguing that a contract with no expiry and recurring funding payments is a swap, not a future. The CFTC moved to dismiss on September 2, with CME’s answer due in early October. Classification affects clearing: under CFTC rules, clearing houses margin futures on a one-day liquidation horizon and most swaps on five days. FM Intelligence estimates swap status would raise clearing margin to 27-45% of position value, versus 12-20% today, cutting maximum retail leverage to 2.2x-3.7x from 6.7x. This estimate scales the one-day requirement by the square root of time and assumes a base, as no clearing house has published margin for an unlisted contract. None of the three exchanges has announced a launch date.