Self-Regulatory Organizations; KalshiEX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Listing Standards for Security Futures Products

SECURITIES AND EXCHANGE COMMISSION [Release No. 34-106422; File No. SR-KALSHIEX-2026-02] Self-Regulatory Organizations; KalshiEX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Listing Standards for Security Futures Products September 18, 2026. Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-7 under the Act, 2 notice is hereby given that on September 18, 2026, KalshiEX LLC (“Kalshi” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. Kalshi has submitted the proposed rule change to the Commodity Futures Trading Commission (“CFTC”) for approval under Section 5c(c) of the Commodity Exchange Act (“CEA”) 3 on September 18, 2026. The CFTC has not yet approved the proposed rule change. 1 15 U.S.C. 78s(b)(7). 2 17 CFR 240.19b-7. 3 7 U.S.C. 7a-2(c). I. Self-Regulatory Organization's Description and Text of the Proposed Rule Change Kalshi proposes to adopt Chapter 14 of its Rulebook to enable the Exchange, pursuant to its designation by the CFTC as a contract market (a “DCM”) and notice-registration with the SEC as a national securities exchange under the Act, to list contracts that convey exposure to the price of an underlying equity security, have no pre-specified expiration date and are designated as Perpetual SFPs in their respective contract specifications (such contracts, “Perpetual SFPs”) as security futures. Holders of long and short positions in Perpetual SFPs will exchange periodic payment obligations in the form of “funding payments” that vary based on the price of the equity security underlying a Perpetual SFP (the “Underlying Security”) relative to the price of the Perpetual SFP. The method through which the Exchange will calculate Perpetual SFP funding payment obligations and associated settlement mechanics are set forth in Rule 14.10, discussed below. When the price of a Perpetual SFP exceeds the price of its Underlying Security, payment will be due from long-side holders of the Perpetual SFP to short-side holders, and vice versa if the price of the Underlying Security exceeds the price of the Perpetual SFP. This funding mechanism is designed to cause the price of the Perpetual SFP to converge to the price of the Underlying Security at each daily settlement cycle by incentivizing market participants to take on positions in the Perpetual SFP (long or short) that align the price of the Perpetual SFP with the price of its Underlying Security. Holders of Perpetual SFPs will exit their positions by offset. All transactions involving Perpetual SFPs listed on the Exchange will be cleared by Kalshi Klear LLC, a CFTC-registered derivatives clearing organization (“Klear”). Categorization of Perpetual SFPs as Security Futures Products The CFTC has already approved Kalshi's listing of perpetual contracts referencing Bitcoin (the “BTCPERP Contracts”) as commodity futures contracts. 4 Although Perpetual SFPs differ from the BTCPERP Contracts in that they overlie equity securities, rather than digital commodities, the defining characteristics of commodity futures and security futures products apart from their respective underliers are the same. This is clearly reflected in the statutory text and structure of the Act and the CEA. 4 Order Approving KalshiEX LLC BTCPERP Futures Contract, In re Request for Approval by KalshiEX LLC of the BTCPERP Futures Contract (CFTC May 29, 2026). The CEA classifies securities as a type of “excluded commodity,”  5 such that security futures are themselves a type of commodity future. Further, the phrase “contract of sale for future delivery” used in the “security future” definition  6 mirrors the language used consistently throughout the CEA to reference commodity futures contracts (“contracts of sale of a commodity for future delivery”). 7 There is no case law or regulatory guidance attributing a different meaning to the phrase “contract of sale for future delivery” as used in the security future definition relative to the same phrase as used to reference commodity futures contracts elsewhere in the CEA, and courts often interpret the meaning of words in a statute by looking to similar phrases used elsewhere in the same statute. 8 5 7 U.S.C. 1a(19). 6 15 U.S.C. 78c(a)(55) (defining “security future” as “a contract of sale for future delivery of a single security or of a narrow-based security index, including any interest therein or based on the value thereof,” subject to exclusions not relevant here). 7 See, e.g., 7 U.S.C. 2(a)(1)(A). 8 See, e.g., Unicolors, Inc. v. H&M Hennes & Mauritz, L.P., 595 U.S. 178, 179 (2022) (“nearby statutory provisions help confirm that here “knowledge” refers to knowledge of the law as well as the facts.”); United Sav. Ass'n of Texas v. Timbers of Inwood Forest Associates, Ltd., 484 U.S. 365, 371 (1988) (“A provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme—because the same terminology is used elsewhere in a context that makes its meaning clear [. . .]”). Like the BTCPERP Contracts, Perpetual SFPs will exhibit the “key characteristics of futures contracts” identified in relevant judicial precedent and CFTC guidance: they will trade at a fixed, standardized unit quantity; each party's obligations will be guaranteed via novation to Klear, a central clearing house that sets margin requirements; holders will be able to exit their positions by offset, they will be available to the public (subject to eligibility requirements in Rule 14.37, discussed below); they will enable their holders to shift and assume risks associated with holding Underlying Securities without requiring actual possession or transfer of such Underlying Securities; and they will be traded on the centralized market of the Exchange. 9 9 See note 4 supra; CFTC v. Co Petro Marketing Group, Inc., 680 F.2d 573, 579-580 (9th Cir. 1982) (“Except for price, all the futures contracts for a specified commodity are identical in quantity and other terms. The fungible nature of these contracts facilitates offsetting transactions by which purchasers or sellers can liquidate their positions by forming opposite contracts.”); In re Stovall, et al., [1977-1980 Transfer Binder] Comm. Fut. L. Rep. (CCH) 20,941, p. 6 (CFTC Dec. 6, 1979) (describing futures contracts as “standardized contracts for the purchase or sale of commodities which provide for future, as opposed to immediate, delivery, and which are directly or indirectly offered to the general public and generally secured by earnest money, or `margin' [and that] are entered into primarily for the purpose of assuming or shifting the risk of change in value of commodities, rather than for transferring ownership of the actual commodities.”); Salomon Forex, Inc. v. Tauber, 8 F.3d 966, 971 (4th Cir. 1993) (“To facilitate the development of a liquid market in these transactions, these contracts are standardized and transferrable. Trading in futures seldom results in physical delivery of the subject commodity, since the obligations are often extinguished by offsetting transactions that produce a net profit or loss”). That Perpetual SFPs will lack a predetermined final settlement date does not disqualify them from categorization as security futures products. Although security futures contracts have traditionally involved “future delivery” in the form of final settlement (in cash or by physical delivery) of the contract on a pre-specified expiry date, the text of the “security future” definition does not require future delivery on a single, specified future date. 10 Every court that has specifically addressed the regulatory treatment of contracts of indefinite duration has found them to be futures contracts where the defining characteristics of a futures contract exist. 11 In one such case, the Seventh Circuit specifically addressed the treatment of listed security derivatives of indefinite duration, holding that contracts of “indefinite duration” can possess the attribute of “futurity”—generally associated with futures contracts—because futurity means any “value that is set in the future.”  12 As future executory payment obligations of contract holders, the periodic funding payments associated with Perpetual SFPs constitute “value that is set in the future” as much as the final settlement date of a traditional futures contract. 13 10 See note 6, supra. Unlike elsewhere in the CEA, Congress did not define “security future” to capture a contract only if it had a single future delivery date. Contrast with 7 U.S.C. 1a(24) (defining a foreign exchange forward as a “transaction that solely involves the exchange of 2 different currencies on a specific future date at a fixed rate agreed upon on the inception of the contract covering the exchange.”) (emphasis added). 11 See Standard Forex II, 1996 WL 435440, at *10, 1996 U.S. Dist. LEXIS 14778, at *29 (E.D.N.Y. 1996). See also CFTC v. Intern. Fin. Servs., 323 F. Supp. 2d 482, 498 (S.D.N.Y. 2004) (“As a matter of law, defendants wrongly characterize certain indicia of futures contract [ sic ] as essential features of such contracts. Principally, they argue at length that without a fixed date for future delivery, a transaction cannot be a futures contract within the [CFTC]'s jurisdiction. They cite no authority for this proposition, however [. . .]”) and CFTC v. International Foreign Curren., 334 F. Supp. 2d 305, 312 (E.D.N.Y. 2004) (“[T]he fact that Defendants' contracts failed to have a specified future delivery date is not determinative”). 12 Chicago Mercantile Exchange v. SEC, 883 F.2d 537, 541 (7th Cir. 1989). Security futures were categorically prohibited at the time CME v. SEC was decided. However, the opinion makes clear that “any index”—including, in principle, a narrow-based security index—could be used as the underlying interest for index participations, which the CME v. SEC court held would be treated as futures. Id. at 539. Under CME v. SEC, as applied under current law, those contracts would constitute security futures. See also CFTC v. First Lexington Group, LLC et al., 03 CV 9124 (GBD) (S.D.N.Y. Mar. 24, 2008). 13 The Chicago Mercantile Exchange (“CME”), beneficiary of the CME v. SEC holding, recently initiated litigation against the CFTC in response to the CFTC's approval of Kalshi's BTCPERP Contract, arguing that the BTCPERP Contracts should not have been approved for listing as futures contracts. Chicago Mercantile Exchange Inc. v. Selig, and Commodity Futures Trading Commission, Case No. 26-cv-02157 (D.D.C. June 18, 2026). The existence of this litigation should not affect the Commission's regulatory treatment of Perpetual SFPs. Not only have no merit rulings yet been delivered in connection with CME's lawsuit, but CME's arguments are misguided as to the text and judicial interpretation of the CEA. For example, CME argues that perpetual contracts such as the BTCPERPs are swaps under the CEA, but ignores the rest of the CEA's “swap” definition, which per se excludes futures from its scope; CME argues that perpetual contracts are not futures contracts because they lack a final settlement date, failing to grapple with the lack of any binding judicial precedent supporting this conclusion and affirmative case law contradicting it. Id. at 35. CME's arguments also contradict positions CME itself has taken in the past. See, e.g., Letter from Jonathan Marcus, Senior Managing Dir. & Gen. Couns., CME Grp. Inc., to Christopher J. Kirkpatrick, Sec'y of the Comm'n, 2 (May 21, 2025) (“certain perpetual-style derivative contracts may accurately be classified as futures”); Letter from Craig S. Donohue, Chief Exec. Officer, CME Grp. Inc., to David A. Stawick, Sec'y of the Comm'n, 4 (July 22, 2011) (“under [the Dodd-Frank Act] market participants retain the option to trade products as either `futures' or `swaps' [. . .]”). Although certain regulations adopted by the Commission and the CFTC applicable to security futures (the “Final Settlement Rules”) contemplate cash-settled security futures having a final settlement price, 14 the Final Settlement Rules do not affirmatively create a standalone regulatory requirement that security futures, whether cash-settled or otherwise, must have a predefined final settlement date. Rather, the joint adopting release of the Commission and the CFTC for the Final Settlement Rules is not only silent on the possibility that a security future may lack a final settlement date, but the core problem the agencies sought to address by adopting the Final Settlement Rules—namely, liquidity constraints resulting from closing-price settlement—does not exist for contracts that, like the Perpetual SFPs, generally do not expire. 15 Further, the perpetual nature of the Perpetual SFPs is not inconsistent with the Final Settlement Rules, which generally require that the final settlement price of a cash-settled security futures contract must fairly reflect the opening price of the underlying security or securities. 16 Rather, the Perpetual SFPs will still be subject to and the Exchange will comply with the Final Settlement Rules to the extent Kalshi initiates delisting or accelerated final settlement procedures pursuant to Rule 14.7 or Rule 14.30 (each as discussed below). 14 17 CFR 41.25(c); 240.6h-1(b) (the “Final Settlement Rules”). 15 SEC and CFTC Joint Final Rule, Cash Settlement and Regulatory Halt Requirements for Security Futures Products, 67 FR 36740, 36755 (May 24, 2002) (“The SEC believes that SEC Rule 6h- 1(b)(1) should facilitate the ability of the securities markets to handle expiration-related unwinding programs and mitigate the liquidity strains that had previously been experienced in the securities markets on expirations for stock index futures and options”). 16 17 CFR 41.25(c); 240.6h-1(b). Chapter 14 of the Exchange's Rulebook Proposed Chapter 14 specifies rules regarding listing standards, margin requirements, eligibility criteria, contract specifications, membership standards and other provisions relating to Perpetual SFPs listed on the Exchange. The full text of Proposed Chapter 14 is included in Exhibit 4 hereto and provided in blackline format—proposed new language is italicized; and proposed deletions are in [brackets]. The Exchange developed Chapter 14 to comply with Section 6(h) of the Exchange Act  17 and the criteria under Section 2(a)(1)(D)(i) of the CEA. 18 17 15 U.S.C. 78f(h). 18 7 U.S.C. 2(a)(1)(D)(i). II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for the, Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for the, Proposed Rule Change 1. Purpose The Exchange proposes to adopt Kalshi Rulebook Chapter 14 (“Perpetual Security Futures Products”) to allow the listing of Perpetual SFPs as security futures products. Listing Standards for Perpetual SFPs Kalshi proposes adopting Rulebook Chapter 14, Part II and related new definitions in Rule 14.2 to set out listing standards pursuant to which it will list Perpetual SFPs for trading and procedures for delisting. The proposed initial and maintenance listing standards are equally or more stringent than the sample listing standards published in Staff Legal Bulletin No. 15 (“SLB 15”). 19 Commission staff published SLB 15 to provide guidance as to how an exchange can comply with the requirements of Section 6(h)(3) of the Act and Section 2(a)(1)(D) of the CEA, which set forth minimum criteria for security futures products traded on national securities exchanges. SLB 15 makes clear that, in addition to the listing standards it sets forth, “there may be other listing standards that would also be consistent with the [Act].”  20 19 SEC Division of Market Regulation, Staff Legal Bulletin No. 15: Listing Standards for Trading Security Futures Products (Sept. 5, 2001), available at https://www.sec.gov/interps/legal/mrslb15.htm. 20 Id. The proposed Perpetual SFP listing standards are identical to the sample listing standards in SLB 15, except that they: • Reflect the modifications to the statutory listing standards requirements jointly adopted by the Commission and the CFTC with respect to shares of exchange-traded funds (“ETFs”) and trust-issued receipts (“TIRs”);  21 21 See Joint Order Modifying the Listing Standards Requirements under Section 6(h) of the Securities Exchange Act of 1934 and the Criteria under Section 2(a)(1) of the Commodity Exchange Act, Securities Exchange Act Release No. 34-61027 (November 19, 2009), 74 FR 61380 (November 24, 2009) (superseding Joint Order Granting the Modification of Listing Standards Requirements, Securities Exchange Act Release No. 46090 (June 19, 2002), 67 FR 42760 (June 25, 2002)). • Include more stringent listing standard requirements, consistent with rule changes recently filed by another security futures exchange, 22 including that (i) the Underlying Security must have an estimated deliverable supply in excess of 20 million shares, (ii) the Underlying Security must have a minimum market capitalization of at least $100 billion, and (iii) the Underlying Security must have had a minimum average daily value of transactions (“ADTV”) of at least $450 million over the prior six months, except where the Underlying Security has been listed for trading for less than six months, in which case the requirement would be a minimum ADTV of at least $1 billion over the prior month; 22 See Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Adoption of Chicago Mercantile Exchange's Rules Governing Security Futures Product Listing Standards, Adoption of Chicago Mercantile Exchange Inc.'s Rules Governing Security Futures Adjustments, and Adoption of Chicago Mercantile Exchange Inc.'s Rules Governing Cash Settled Single Stock Security Futures, Exchange Act Release No. 34-105844 (July 2, 2026), 91 FR 41676 (July 7, 2026) (“CME SFP Rule Filing”). • Include more stringent maintenance listing standard requirements, consistent with rule changes recently filed by another security futures exchange, 23 including that (i) the Underlying Security must have an estimated deliverable supply in excess of 20 million shares, (ii) the Underlying Security must have a minimum market capitalization of at least $50 billion and (iii) the Underlying Security must have had a minimum ADTV of at least $200 million for the prior calendar quarter, except where the Underlying Security has been listed for trading for less than a quarter, in which case the requirement would be a minimum ADTV of at least $1 billion over the trading period during the calendar quarter; 23 Id. • Categorically exclude several categories of securities from serving as underlying securities of Perpetual SFPs, as described below; • Require the issuers of securities underlying Perpetual SFPs to be current in all periodic reporting obligations under Sections 13 and 15(d) of the Act (or, if the security is an ETF share, under the Investment Company Act of 1940 (the “1940 Act”) and the Securities Act of 1933) and provide that the Exchange shall verify reporting status through review of the issuer's EDGAR filings prior to listing and on an ongoing basis thereafter; • Because Perpetual SFPs have no expiration date such that the Exchange will not continually open for trading contracts for subsequent delivery months, provide that failure of a security to satisfy maintenance standards and failure to remedy such failure within a 90 day cure period result in delisting of the Perpetual SFP overlying that security; • Provide that the Exchange shall immediately halt trading (including the execution and reporting of block trades) in and initiate delisting of a Perpetual SFP upon the occurrence of any of the Immediate Delisting Events described below; and • Contain certain provisions that reflect rule changes that have been filed by other security futures exchanges since the adoption of SLB 15, which vary from the sample listing standards set forth in SLB 15. This section describes the generalized Rule framework for Part II of Rulebook Chapter 14 (Rules 14.3 through Rule 14.8). Initial Listing Standards for Perpetual SFP. Rule 14.3 provides that an equity security is eligible to serve as the Underlying Security for a Perpetual SFP listed on the Exchange only if it satisfies the following requirements at the time of initial listing: Rule 14.3(h), or “Requirement 1,” requires that the Underlying Security must be common stock, an American Depositary Receipt (“ADR”), TIR or an ETF share that satisfies the requirements of Rule 14.4(e). Rule 14.4(e) categorically excludes exchange-traded notes, closed-end fund shares, shares of other pooled investment vehicles registered under the 1940 Act and shares of leveraged, inverse or synthetic exchange-traded products from eligibility to serve as Underlying Securities for Perpetual SFPs, provided that Rule 14.4(e) does not exclude from eligibility shares of an ETF that “(i) is registered with the [Commission] as an open-end management investment company or unit investment trust under the [1940 Act], (ii) issues and redeems shares at net asset value in creation-unit aggregations, (iii) holds or seeks to track a diversified portfolio or index of equity securities, and (iv) is not leveraged, inverse or synthetic.” Rule 14.3(a) requires that the Underlying Security “must be registered pursuant to Section 12” of the Act (“Requirement 2”) and “a `NMS security' as defined in Section 11A of the Exchange Act and Rule 600(b) of SEC Regulation NMS” and its issuer “must be in compliance with any applicable requirements of the” Act (“Requirement 3”). In addition, Rule 14.3(a) provides that securities traded exclusively on over-the-counter (“OTC”) markets, foreign exchanges without a U.S. listing or any non-registered trading venue are not eligible to serve as Underlying Securities for Perpetual SFPs and that, in all cases, an Underlying Security must satisfy the requirements applicable to securities underlying SFPs under CFTC Regulation 41.21(a). Rule 14.3(e), or “Requirement 4,” requires that “[t]he Underlying Security must have a Public Float of not less than 7,000,000 shares.” Rule 14.2 defines “Public Float” as “the number of outstanding shares of the Underlying Security that are not held by officers, directors, or beneficial owners of more than 10% of the class of securities, calculated based on the most recent publicly available filings with the SEC.” The corresponding requirement in the SLB 15 listing standards requires any security underlying a security futures product based on a single security to have at least seven million shares outstanding that are owned by persons other than those required to report their stock holdings pursuant to Section 16(a) of the Act, which requires reporting by “[e]very person who is directly or indirectly the beneficial owner of more than 10 percent of any class of any equity security (other than an exempted security) which is registered pursuant to [Section 12], or who is a director or an officer of the issuer of such security.”  24 24 15 U.S.C. 78p(a)(1). Rule 14.3(j), or “Requirement 5,” requires an Underlying Security, other than an ETF share or a TIR, to have at least 2,000 security holders, whether of record or beneficial. Rule 14.3(c), or “Requirement 6,” requires that any Underlying Security “have an ADTV of not less than $450,000,000 over the six months immediately preceding the New Product Committee (“NPC”)'s review, except where the Underlying Security has been listed for trading for less than six months, in which case the Underlying Security must have an ADTV of not less than $1,000,000,000 over the prior month.” In computing ADTV, the Exchange will use consolidated price data from the relevant securities information processor (“SIP”). The Exchange proposes adding this requirement, which is substantially more stringent than the corresponding requirement in the SLB 15 listing standards which require any security underlying a security futures product based on a single security to have an ADTV of at least 109,000 shares in each of the preceding 12 months, in order to more effectively protect against manipulative practices. Rule 14.3(d), or “Requirement 7,” requires that “[i]f the Underlying Security is a `covered security' as defined under Section 18(b)(1)(A) of the Securities Act of 1933, the closing price of the Underlying Security has been at least $3.00 for the previous five consecutive business days preceding the date on which the Exchange commences to list and trade the Perpetual SFP contract on such Underlying Security.” And, “[i]f the Underlying Security is not a `covered security' as defined under Section 18(b)(1)(A) of the Securities Act of 1933, the closing price of the Underlying Security has been at least $7.50 for the previous five consecutive business days preceding the date on which the Exchange commences to list and trade the Perpetual SFP contract on such Underlying Security.” The $3.00 minimum share price requirement for Underlying Securities that are “covered securities” has been implemented by several other security futures exchanges. 25 25 See, e.g., CME SFP Rule Filing at 41678; Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by CBOE Futures Exchange, LLC Relating to Its Listing Standards for Security Futures Products, Exchange Act Release No. 34-52295 (August 18, 2005), 70 FR 49691, 49692 (Aug. 24, 2005). In the case of an Underlying Security that is an ADR, Rule 14.3(l), or “Requirement 8,” requires that one of the four conditions set forth in requirement VIII of the SLB 15 initial listing standards for security futures products based on a single security must be satisfied. 26 26 See SLB 15 (“If the underlying security is an ADR: (a) The Exchange or Association must have an effective surveillance sharing agreement with the primary exchange in the home country where the stock underlying the ADR is traded; (b) The combined trading volume of the ADR and other related ADRs and securities occurring in the U.S. ADR market, or in markets with which the Exchange or Association has in place an effective surveillance sharing agreement, represents (on a share equivalent basis) at least 50% of the combined worldwide trading volume in the ADR, the security underlying the ADR, other classes of common stock related to the underlying security, and ADRs overlying such other stock over the three-month period preceding the dates of selection of the ADR for futures trading (`Selection Date'); (c)(1) The combined trading volume of the ADR and other related ADRs and securities occurring in the U.S. ADR market, and in markets where the Exchange or Association has in place an effective surveillance sharing agreement, represents (on a share equivalent basis) at least 20% of the combined worldwide trading volume in the ADR and in other related ADRs and securities over the three-month period preceding the Selection Date; (2) The average daily trading volume for the security in the U.S. markets over the three-month period preceding the Selection Date is at least 100,000 shares; and (3) The trading volume is at least 60,000 shares per day in the U.S. markets on a majority of the trading days for the three-month period preceding the Selection Date; or (d) The Securities and Exchange Commission and Commodity Futures Trading Commission have otherwise authorized the listing”). Rule 14.3(m) includes interpretations of Requirements 4 (Public Float), 5 (Number of Shareholders), 6 (Trading Volume) and 7 (Share Price) as applied to “Restructure Securities,” defined in Rule 14.2 as an “equity security that a company issues or anticipates issuing as the result of a spin-off, reorganization, recapitalization, restructuring or similar corporate transaction” consistent with the term's definition in SLB 15. 14.3(m) interprets Requirements 4, 5, 6 and 7 as applied to Restructure Securities in a manner substantially identical to the interpretations of the corresponding requirements in SLB 15 to Restructure Securities, except that the relevant market price of the Restructure Security—for purposes of determining whether a Restructure Security that is distributed pursuant to a public offering or a rights distribution satisfies Requirement 7—refers to the market price of the Restructure Security being at least the minimum share price applicable to it under Rule 14.3(d) (which may be $3.00 for Restructure Securities that are “covered securities” or $7.50 for Restructure Securities that are not “covered securities”). Rule 14.4 categorically excludes Restructure Securities that are not yet issued and outstanding, regardless of whether the Restructure Security is traded on a “when issued” basis or on another basis that is contingent upon the issuance or distribution of securities (“Requirement 9”). Rule 14.3(b), or “Requirement 10,” requires that any Underlying Security must have a market capitalization of at least 100 billion U.S. dollars, calculated as of the product of (i) the closing price on the principal listing exchange of the security and (ii) total shares outstanding, measured as of the most recent trading day prior to the NPC's review of the security. The Exchange proposes adding this requirement, which is substantially more stringent than the corresponding requirement in the SLB 15 listing standards which do not impose any minimum market capitalization requirement for the underlying securities of initial listing of security futures products based on a single security, in order to more effectively protect against manipulative practices. Rule 14.3(f), or “Requirement 11,” requires that “[t]he Underlying Security must have an Estimated Deliverable Supply in excess of 20 million shares.” Rule 14.2 defines “Estimated Deliverable Supply” as the “free float of the Underlying Security, calculated as issued and outstanding shares less restricted shares ( e.g., restricted and control securities not registered with the SEC for public sale).” This definition is intended to reflect the definition of “estimated deliverable supply” in CFTC Regulation 41.25 and the CFTC's guidance in Appendix A to Subpart C of Part 41 of CFTC Regulations. 27 The Exchange proposes adding this requirement in order to more effectively protect against manipulative practices. 27   See 17 CFR 41.25(a) (defining “Estimated deliverable supply” as “the quantity of the security underlying a security futures product that reasonably can be expected to be readily available to short traders and salable by long traders at its market value in normal cash marketing channels during the specified delivery period.”); 17 CFR Appendix A to Subpart C of Part 41 (Guidance and Acceptable Practices for Position Limits and Position Accountability for Security Futures Products) (a)(1). Rule 14.3(g), or “Requirement 12,” requires that the issuer of an Underlying Security “must be current in all periodic reporting obligations under Sections 13 or 15(d) of the [Act] (including, in the case of a foreign private issuer whose equity securities are represented by an ADR, the reports required on Form 20-F and Form 6-K).” Rule 14.3(g) further provides that the Exchange shall verify reporting status through the Commission's EDGAR reporting system prior to listing. With respect to Underlying Securities that are ETF shares, Rule 14.3(g) provides that the “issuer must instead be a registered investment company that is current in the periodic reports, financial statements, and registration-statement or prospectus updates required of it under the [1940 Act] and the Securities Act of 1933, as verified through the [Commission's] EDGAR system.” In the case of an Underlying Security that is an ETF or a TIR, Rule 14.3(k), or “Requirement 13,” requires such an Underlying Security to “have had a total trading volume (in all markets in which it has traded) of at least 2,400,000 shares or receipts evidencing the Underlying Security in the twelve (12) months preceding the NPC's review.” Categorical Exclusions from Eligibility. In addition to these requirements, Rule 14.4 categorically excludes from eligibility as an Underlying Security for a Perpetual SFP listed on the Exchange: (i) any security whose issuer has filed a bankruptcy petition or has been the subject of an involuntary petition (or is subject to analogous foreign insolvency proceedings, (ii) any security that is subject (or, in the prior 10 trading days has been subject) to a trading halt, suspension or revocation of listing by its principal listing exchange or by the Commission pursuant to Section 12(k) of the Act, 28 or that is subject to a suspension of the effectiveness of, or revocation of, its registration by the Commission pursuant to Section 12(j) of the Act, 29 (iii) any security issued by a blank check company or special purpose acquisition company that has not completed a qualifying de-SPAC business combination or that remains in the pre-combination trust period, (iv) any security whose issuer is or is controlled by entities in a sanctioned jurisdiction or is subject to sanctions, (v) other than qualifying ETF shares, exchange-traded notes, closed-end fund shares, pooled investment vehicles registered under the 1940 Act and leveraged, inverse or synthetic exchange-traded products, (vi) rights, warrants, subscription receipts, units consisting of multiple component securities or similar derivative or hybrid equity instruments and (vii) subject to exemptions which may be granted by the NPC, any security for which a material corporate action has been publicly announced and is pending completion, where such action, if completed with respect to the underlying security of a Perpetual SFP, could result in accelerated final settlement of the Perpetual SFP. 28  15 U.S.C. 78l(k). 29  15 U.S.C. 78l(j). The Exchange proposes adding these categorical exclusions in order to more effectively protect against manipulative practices. New Product Approvals. Rule 14.8 sets forth the Exchange's new product approval process for Perpetual SFPs. Prior approval of the NPC is required for any new Perpetual SFP to be listed on the Exchange. The NPC shall consist of at least three members, including the Exchange's Head of Markets (or his or her designee) and requires the NPC to maintain written records of all product determinations. For each proposed Perpetual SFP listing, the NPC shall verify that the Underlying Security satisfies all initial listing criteria under Rule 14.3, confirm that no categorical exclusion under Rule 14.4 applies, evaluate the susceptibility of the Underlying Security to manipulation, assess the adequacy of the proposed contract specifications, review the availability and reliability of data sources necessary for settlement and margining and document the basis for its determination in a written approval memorandum. The NPC shall specifically factor anti-manipulation considerations into their determination of whether to approve a new Perpetual SFP for listing on the Exchange and may deny or condition approval on enhanced position limits, margin requirements or other risk controls upon identification of elevated manipulation risk. The NPC retains discretion to decline to list a Perpetual SFP on any Underlying Security notwithstanding such security's satisfaction of any criteria set forth in Chapter 14. Additionally, Rule 14.3(i) states that, for an issuer with multiple classes of common stock, each class shall be assessed independently against the criteria in Rule 14.3. The NPC may elect to list Perpetual SFPs on more than one class of an issuer's stock. Following NPC approval, the Exchange shall certify or submit for voluntary approval the new Perpetual SFP with or to the CFTC pursuant to either (i) CFTC Regulations 40.2 and 41.23(a)  30 or (ii) CFTC Regulations 40.3 and 41.23(b), 31 and, where applicable, certify or submit corresponding rule changes with or to the CFTC pursuant to CFTC Regulation 40.5 or CFTC Regulation 40.6, 32 in each case as applicable. The Exchange shall ensure that the listing process for and trading of Perpetual SFPs comply with all Commission and CFTC requirements applicable to security futures products. The Exchange shall publish and maintain current on its website a table (the “Approved Securities Table”) setting forth the Underlying Securities that have been approved to underlie Perpetual SFPs listed on the Exchange. 30  17 CFR 40.2, 41.23(a). 31  17 CFR 40.3, 41.23(b). 32  17 CFR 40.5, 40.6. Maintenance Listing Standards for Perpetual SFPs. Rule 14.6(a) provides that the Exchange shall, on the last business day of each calendar quarter (each such date, a “Review Date”), “evaluate each listed Perpetual SFP against” each of six maintenance requirements and Rules 14.6(d) and 14.6(f) each set forth additional maintenance requirements. These eight maintenance requirements are as follows, as of each Review date: (i) the Underlying Security maintains a Public Float of not less than 6.3 million shares (“Requirement 1.a”), (ii) other than for ETF Shares and TIRs, there are at least 1,600 holders of the Underlying Security, whether of record or beneficial (“Requirement 2.a”), (iii) the ADTV of the Underlying Security is not less than $200 million for the prior calendar quarter, except where the Underlying Security has been listed for less than a quarter, in which case the Underlying Security must have an ADTV of not less than $1 billion over the period traded during the calendar quarter (“Requirement 3.a”); (iv) the Underlying Security must have a closing price of not less than $3.00 per share on each of the ten (10) consecutive trading days immediately preceding the Review Date (“Requirement 4.a.”), (v) if the Underlying Security is an ADR, meet one of the four criteria set forth in Maintenance Requirement V of SLB 15 (“Requirement 5.a”), (vi) confirmation that the issuer of the Underlying Security is current in all periodic and other reporting obligations under Sections 13 and 15(d) of the Act  33 (“Requirement 6.a”), (vii) the Underlying Security has an estimated deliverable supply of at least 20 million shares (“Requirement 7.a”) and (viii) the Underlying Security has a market capitalization of not less than $50 billion (“Requirement 8.a”). 33  15 U.S.C. 78m, 78o(d). For Underlying Securities that are Restructure Securities, pursuant to Rule 14.6(h), the ADTV and market price history of the related equity security of the relevant company that existed prior to the ex-date of the spin-off, reorganization, recapitalization, restructuring or similar corporate transaction giving rise to a Restructure Security prior to commencement of trading in the Restructure Security, including when-issued trading, may be taken into account in determining whether the corresponding maintenance requirements ( i.e., Requirements 3.a and 4.a, respectively) apply. Rule 14.6(e) provides that, for an Underlying Security that is an ETF share or a TIR, the applicable initial listing requirements shall apply to the ETF share or TIR instead of the maintenance requirements described above. Under Rule 14.6(b), if an Underlying Security fails to satisfy any one of these maintenance requirements on a Review Date, the Exchange shall provide notice to its participants and allow a cure period of ninety (90) calendar days. If the Underlying Security fails to regain compliance with all applicable maintenance requirements within this cure period, the Exchange shall initiate delisting procedures with respect to the Perpetual SFP overlying such Underlying Security pursuant to Rule 14.7. Because Perpetual SFPs have no fixed expiration date, such that they have indefinite durations and do not require periodic contract roll-overs on a delivery month, the initiation of delisting procedures with respect to a Perpetual SFP is the analogous measure to refusal to open for trading a dated security futures product with a new delivery month. Immediate Delisting Events. Rule 14.6(c) provides that certain events relating to an Underlying Security will result in immediate delisting of the corresponding Perpetual SFP by the Exchange without the ninety (90) day cure period described above. Such events include: (i) delisting of the Underlying Security from the national securities exchange on which the security is primarily listed for trading (the “Primary Listing Exchange”), (ii) the issuer's entry into bankruptcy, liquidation or insolvency proceedings, (iii) the Commission's issuance of a trading suspension under Section 12(k) of the Act or an order under Section 12(j) of the Act suspending the effectiveness of, or revoking, the registration of the security, (iv) the security ceasing to exist as a result of a completed corporate action or (v) the issuer or its controller becoming subject to sanctions (each such event, an “Immediate Delisting Event”). Upon the occurrence of an Immediate Delisting Event, the Exchange shall promptly confirm that such event has occurred and, upon such confirmation, immediately halt trading (including the execution and reporting of block trades) in the Perpetual SFP corresponding to the relevant Underlying Security. The Exchange shall then publicly announce such halt and notify participants by Exchange Notice of the applicable final settlement timeline. All open positions in affected Perpetual SFPs shall be settled in accordance with the delisting procedures in Rule 14.7. Delisting Procedures. Rule 14.7 provides that, “[w]hen the Exchange determines that a Perpetual SFP must be delisted, the following procedures apply.” The Exchange shall first provide written notice to all of its participants specifying the reason for the delisting and the applicable timeline. For delistings involving a cure period ( i.e., failure to satisfy a maintenance requirement), the Exchange shall provide not less than thirty (30) calendar days' notice prior to the final settlement date of the relevant Perpetual SFPs. For Immediate Delisting Events, the Exchange shall conduct final settlement as promptly as practicable, but no later than five business days following the triggering Immediate Delisting Event. Final settlement will then proceed in a manner fully compliant with the Final Settlement Rules. Where delisting arises from a Corporate Action addressed under Part VII of Chapter 14 and as applicable, the final settlement price shall be the consideration payable to holders of the Underlying Security under the announced terms of the Corporate Action. Otherwise, the final settlement price for a delisted Perpetual SFP shall be the opening price of the Underlying Security on its Primary Listing Exchange on the date of final settlement. Where such price is not readily available, the final settlement price shall fairly reflect the price of the Underlying Security on its Primary Listing Exchange during the most recent regular trading session for such Underlying Security or the next available opening price of the Underlying Security. Notwithstanding the foregoing, as provided in the Final Settlement Rules, where Klear, in its capacity as central clearinghouse of the Perpetual SFPs, determines that such price is not consistent with the protection of customers and the public interest, taking into account the factors set forth in CFTC Regulation 41.25(c)(3) and Commission Rule 6h-1(b)(3), 34 Klear may determine, pursuant to its rules, an alternative final settlement price. 34 17 CFR 41.25(c)(3); 240.6h-1(b)(3). Higher Margin Levels for Perpetual SFPs Kalshi proposes adopting Rulebook Chapter 14, Part V and related new definitions in Rule 14.2 (the “Perpetual SFP Margin Rules”) to specify customer margin requirements for Perpetual SFPs listed on the Exchange. Specifically, the Perpetual SFP Margin Rules will establish procedures relating to the determination and administration of customer margin requirements for Perpetual SFPs and the applicability of those requirements. Section 3(a)(57)(C) of the Act defines “higher margin level” and “higher level of margin,” when such terms are used with respect to a security futures product, as “a margin level established by a national securities exchange registered pursuant to [S]ection 6(g) [of the Act] that is higher than the minimum amount established in effect pursuant to [S]ection 7(c)(2)(B)” of the Act. 35 Section 7(c)(2)(B) of the Act grants the Commission and the CFTC joint rulemaking authority to prescribe margin requirements for security futures products. 36 Pursuant to this authority, the Commission and the CFTC have adopted parallel rules establishing a fifteen (15) percent minimum initial and maintenance customer margin requirement for long or short security future positions and permitting exchanges to prescribe lower margin requirements for permitted offsetting positions involving security futures and related positions. 37 The Perpetual SFP Margin Rules will establish “higher margin levels,” as defined in Section 3(a)(57)(C) of the Act, as discussed below. 35 15 U.S.C. 78c(a)(57)(C). 36 15 U.S.C. 78g(c)(2)(B). 37 17 CFR 242.403(b); 41.45(b) (together, the “Customer Margin Rules”). Perpetual SFP Margin Rates. Rule 14.16(a) requires each member of the Exchange intermediating Perpetual SFP transactions on behalf of customers (such members, who must satisfy the eligibility requirements set forth in Rule 14.37, “SFP Broker Members”) that is also a futures commission merchant that has entered into an futures commission merchant (“FCM”) Member Agreement with Kalshi (a “FCM SFP Broker Member”) to collect and maintain from each of their customers, for each Perpetual SFP position carried in such customer's account, “margin in an amount not less than 15.50% (such percentage, the “Perpetual SFP Margin Ratio”) of the Current Market Value of the position” (such amount, with respect to a Perpetual SFP, the “Perpetual SFP Required Margin”). Rule 14.16(b) further provides that the “Current Market Value” of a position equals the product of (i) the number of Perpetual SFP contracts comprising the position, (ii) the number of shares of the Underlying Security represented by one Perpetual SFP contract, which shall be one hundred (100) shares of the Underlying Security (the “Contract Unit”) and (iii) the settlement value, as determined by the Exchange pursuant to Rule 14.12(a)-(c), of the Perpetual SFP (the “Mark Price”). Rule 14.12 describes the process by which the Exchange shall determine the Mark Price of a Perpetual SFP as “the following tiered methodology, applied in descending order: (i) Tier 1—Trade VWAP. [i]f one or more trades other than [b]lock [t]rades in the Perpetual SFP occur during the [sixty-second] Computation Interval, the Mark Price shall be the volume-weighted average price (“VWAP”) of those trades (excluding any [b]lock [t]rades executed during the Computation Interval). The VWAP calculation shall be adjusted to exclude outliers. The Exchange generally shall apply a Median Absolute Deviation filter but may, in its discretion, exclude other outlier or manipulative transactions. Tier 1 shall not apply, and the Mark Price shall instead be determined under Tier 2 or Tier 3, as applicable, if the VWAP so calculated differs from the Underlying Price Index as of the Mark Price Calculation Time by more than fifty percent (50%) of that Underlying Price Index. (ii) Tier 2—Sampled Midpoint Average. [f]or purposes of this Tier 2, sixty (60) observation points shall occur at exactly N seconds before the Mark Price Calculation Time for each integer N from 1 through 60 (each, an “Observation Point”). The prevailing best bid and prevailing best ask at an Observation Point shall be the best bid and best ask resting on the Perpetual SFP order book as of that instant. An Observation Point shall be “two-sided” if both a prevailing best bid and a prevailing best ask are present at that instant, and the “Midpoint” at a two-sided Observation Point shall be the arithmetic mean of its prevailing best bid and prevailing best ask. A two-sided Observation Point shall be disregarded if the difference between its prevailing best ask and prevailing best bid exceeds ten percent (10%) of its Midpoint. If the Mark Price is not determined under Tier 1, whether because no trades in the Perpetual SFP occur during the Computation Interval or because Tier 1 does not apply as provided in paragraph (a)(1), and at least one Observation Point is two-sided and is not disregarded, the Mark Price shall be the arithmetic mean of the Midpoints at all two-sided Observatio