CFTC Requests Comment on the Use of Artificial Intelligence in CFTC-Regulated Markets

By: Cheryl L. Isaac, Matthew J. Rogers, and Benjamin C. Skillin

On 25 January, 2024, multiple Divisions of the Commodity Futures Trading Commission (CFTC) issued a Request for Comment (RFC) on the use of Artificial Intelligence (AI) in CFTC-regulated derivatives markets. The RFC seeks information on the current and potential uses of AI as well as the risks associated with using it. The RFC is intended to complement the Biden Administration’s Executive Order urging federal agencies to promote the safe, secure, and trustworthy development of AI. The CFTC staff views the RFC as an opportunity to “identify the highest priorities and return-on-investment projects with AI use cases” and enhance the CFTC’s data-driven approach to policy, surveillance, and enforcement.

Through the RFC, the CFTC joins a host of other regulators examining AI’s impact on finance and related services. The CFTC staff will consider the public comments as it determines whether or not to move forward with any future interpretive guidance, policy statements, or rulemakings related to the use of AI in US derivatives markets.

Specific Comments Sought:

  • The proper definition of AI, and how broadly or narrowly it should be defined with respect to automated trading strategies and CFTC-regulated markets;
  • The application of AI in trading, risk management, compliance, cybersecurity, recordkeeping, data processing, analytics, and customer interactions;
  • The role of third parties in developing AI technologies; and
  • The risks of AI, including those related to market manipulation, fraud, governance, explainability, data quality, concentration, mitigation of bias, privacy and confidentiality, and general customer protection.

Commissioner Kristen Johnson remarked that the RFC aids ongoing conversations between Divisions of the CFTC about the need for new regulatory tools and methodologies to address AI, and will assist the Market Risk Advisory Committee in developing formal recommendations to the CFTC on topics related to AI and other emerging technologies. 

Comments can be submitted electronically through the CFTC Comments online process until 24 April, 2024.

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