CTF Written Submission

Re: Automated Market Makers and the Consistent Application of Securities Market Regulations

March 30, 2026
  • AMM‑based trading of tokenized securities must be regulated based on function, not technology, ensuring that entities performing exchange, ATS, broker, or dealer roles—such as protocol deployers, governance bodies, significant liquidity providers, and front‑ends—are subject to corresponding federal securities law obligations.
  • AMMs introduce structural investor‑protection and market‑integrity risks (MEV/front‑running, slippage, oracle failures, pseudonymous trading, lack of surveillance, limited dispute resolution, liquidity fragmentation) that must be mitigated through mandatory controls, disclosures, AML/KYC application, and integration with existing market‑structure requirements.
  • To support compliant securities trading, AMM venues must incorporate price discovery, reporting, systems integrity, and operational resilience comparable to Regulation NMS and Regulation SCI, including reliable market data, transparent execution, and accountable entities capable of maintaining and upgrading smart‑contract trading systems

Last Reviewed or Updated: March 30, 2026