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CFTC Seeks Industry Insight on AI Use in Compliance and Market Dynamics

AI The United States Commodity Futures Trading Commission (CFTC) has taken a significant step in fostering a comprehensive understanding of artificial intelligence (AI) applications within regulated entities, particularly in the derivatives markets. In alignment with the directives set by the Biden Administration for the secure and trustworthy development of AI, the CFTC has issued a
 

CFTC Seeks Industry Insight on AI Use in Compliance and Market Dynamics
The United States Commodity Futures Trading Commission (CFTC) has taken a significant step in fostering a comprehensive understanding of artificial intelligence (AI) applications within regulated entities, particularly in the derivatives markets. In alignment with the directives set by the Biden Administration for the secure and trustworthy development of AI, the CFTC has issued a request for comments (RFC) aimed at gaining insights into how AI is utilized in compliance efforts and various other facets by regulated entities.

This RFC is pivotal, as the feedback received will play a crucial role in shaping future CFTC guidance, interpretations, policy statements, and regulations related to AI. The CFTC is keen to explore AI’s current and potential applications, as well as the associated risks, in areas such as trading, risk management, compliance, cybersecurity, recordkeeping, data processing, analytics, and customer interactions.

CFTC Chair Rostin Behnam emphasizes the strategic importance of the RFC, stating that it will enhance the CFTC’s ability to identify high-priority projects with AI use cases. The goal is to optimize the agency’s data-driven approach to policy, surveillance, and enforcement.

In addition, Commissioner Kristin Johnson underscores the ongoing nature of the conversation within various departments of the agency, emphasizing the importance of understanding how market actors adopt AI in derivatives markets. The RFC seeks input on the definition of AI, addressing the breadth or narrowness of the term and drawing clear distinctions between AI and other existing automated trading strategies.

Furthermore, CFTC Commissioner Christy Goldsmith Romero had previously highlighted the need to update protection measures in response to technological advancements. To bolster investor protections, Romero appointed technology experts in fintech, responsible AI, cryptocurrency, blockchain, and cybersecurity to the CFTC’s Technology Advisory Committee.

It’s worth noting that the CFTC remains vigilant against potential fraudulent activities related to AI trading bots in the cryptocurrency space. The agency warns investors against relying on AI-assisted technologies, such as trade signal algorithms and crypto-asset arbitrage algorithms, cautioning that some individuals may falsely promise significant profits through these means.

The CFTC’s commitment to safeguarding investors and staying ahead of technological developments is evident in its multifaceted approach to AI regulation and oversight. The deadline for comments on the RFC is set for April 24, 2024.

Wasif Shakir

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