FIA urges CFTC to regulate use cases rather than AI itself

Rick Steves

“We urge the CFTC to refrain from crafting new regulations that generally regulate AI because this approach presents certain well-known pitfalls. By approaching the issue from the perspective of AI as a technology, rather than the use case for the technology, corresponding regulations would likely necessitate a definition of AI. We anticipate that any attempt to properly define AI would be very challenging and require considerable resources.”

The Futures Industry Association has urged the Commodity Futures Trading Commission to regulate the use cases of artificial intelligence in derivatives markets.

In a letter joined by CME, ICE, and FIA PTG, the trade organization is recommending a “technology-neutral” approach to regulation that should focus on “outcomes and use cases” rather than AI itself.

“In many instances, existing CFTC rules and guidance provide the controls and oversight needed for the CFTC to promote and protect the integrity and resilience of our markets. We believe that the CFTC’s risk-based approach to developing a regulatory framework around outcomes and use cases, rather than the underlying technology, likely means that the CFTC’s existing rule sets already address perceived risks,” said the letter.

“Any attempt to properly define AI would be very challenging”

The CFTC has sought feedback from the public before determining whether additional regulation is needed. FIA responded to the request for comment issued in January by encouraging the agency to continue gathering information to help it better understand the current and potential uses for AI as well as the risks that may arise.

Additionally, FIA urged the CFTC to consider the applicability of its existing rules and regulations before presupposing that new, AI-specific regulations are needed.

The FIA letter, signed by Kara Dutta Vice President, Head of Legal, US Futures Exchanges & Clearing, can be summed up in four points:

1. The CFTC should consider its existing rules and guidance prior to taking action. “In many instances, existing CFTC rules and guidance provide the controls and oversight needed for the CFTC to promote and protect the integrity and resilience of our markets. For example, when contemplating the use of AI in records management, the CFTC should consider its existing recordkeeping requirements and whether or not there is a need to update them.”

2. The CFTC should approach the topic of AI based upon specific use cases, not the technology itself. “We urge the CFTC to refrain from crafting new regulations that generally regulate AI because this approach presents certain well-known pitfalls. By approaching the issue from the perspective of AI as a technology, rather than the use case for the technology, corresponding regulations would likely necessitate a definition of AI. We anticipate that any attempt to properly define AI would be very challenging and require considerable resources. A comprehensive definition that differentiates AI from other technology would be extremely difficult to develop.”

3. The use cases for AI are long-standing, expansive, and commercially sensitive. “Recent surveys of market participants show that early use cases are largely focused on noncustomer-facing activities. We understand that FIA’s members may utilize AI, now or in the future, across a broad array of areas, including the development of text transcription, hedging and risk management programs, trading strategies, and compliance processes and controls. ”

4. The governance and controls around the use of AI should depend upon the type, size, and complexity of the business. “It is critical that companies retain the flexibility to consider and implement technology governance consistent with the type, size, and complexity of the relevant business. To use a specific example, Staff asked whether senior management at an institution are responsible for oversight of AI. FIA understands that certain institutions may deem it appropriate to appoint an AI Information Technology Officer, whereas others may not believe such a specific role to be necessary.”

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