The United States Commodity Futures Trading Commission (CFTC) is keen to understand better how artificial intelligence (AI) is used in compliance tasks and other applications within regulated entities. To achieve this, the agency has requested public comments to improve staff knowledge about AI’s current and future roles and associated risks in derivatives markets. Their feedback could influence future CFTC guidance, policy statements, or even regulations.
The CFTC is interested in learning about AI applications across several areas in derivatives markets. These include trading, risk management, compliance, cybersecurity, recordkeeping, data processing, analytics, and customer interactions. AI’s potential role in compliance-related areas like surveillance, Anti-Money Laundering (AML), and regulatory reporting is exciting.
CFTC Chair Rostin Behnam highlighted that this request for comment (RFC) aligns with the Biden Administration’s directives for safely, securely, and trustily developing artificial intelligence. The deadline for submitting comments is set for April 24, 2024.
Commissioner Kristin Johnson noted that the RFC represents an ongoing conversation within various CFTC divisions, including Market Participant, Clearing and Risk, Market Oversight, and Data. She stressed the importance of understanding how market players adopt AI in derivatives markets. A key part of the RFC is to discuss the appropriate definition of AI, including how broad or narrow it should be, and distinguish AI from other automated trading strategies.
In September 2023, CFTC Commissioner Christy Goldsmith Romero proposed updating protection measures to keep pace with technological advancements and safeguard American investors. Romero has been proactive in this area, appointing technology experts in fintech and responsible AI, cryptocurrency, blockchain, and cybersecurity to the CFTC’s Technology Advisory Committee.
The CFTC has warned investors seeking substantial cryptocurrency profits, advising caution against relying on AI trading bots. The agency pointed out that those offering impressive returns through bots, trade signal algorithms, crypto-asset arbitrage algorithms, and other AI-assisted technologies could be fraudulent.
