CFTC to Monitor Use of AI in Derivatives Markets

The Commodity Futures Trading Commission (CFTC) is tracking the use of artificial intelligence (AI) in derivatives markets and intends to monitor CFTC-regulated entities’ use of the technology as part of the agency’s routine oversight activities.

The agency said this in a Thursday (Dec. 5) press release and statements announcing that it issued an advisory addressing the use of AI by CFTC-registered entities and registrants.

Developed by the CFTC’s Divisions of Clearing and Risk, Data, Market Oversight and Market Participants, the advisory reminds these entities of their obligations under the Commodity Exchange Act (CEA) and the CFTC’s regulations as they begin to implement AI, according to the release.

The advisory addresses the use of AI in areas like risk assessment and risk management, compliance and recordkeeping, and customer protection. It also reminds registrants that the CEA and CFTC regulations continue to apply to these areas.

“The advisory is emblematic of the CFTC’s technology-neutral approach, which balances market integrity with responsible innovation in the derivatives markets,” CFTC Chairman Rostin Behnam said in a Thursday statement. “As firms may thread AI into the fabric of nearly every aspect of their operations, staff intends to monitor for any risks from AI that may merit policy or regulatory consideration.”

CFTC Commissioner Kristin N. Johnson said in a Thursday statement that while she supports the agency’s inquiries regarding the integration of AI into its markets, she also advocates immediate steps to enhance the benefits and minimize the risks of the technology.

“I have advocated for and repeat the call today for the creation of an AI Fraud Task Force, enhanced information gathering on the use and adoption of AI technologies by market participants, the development of an interagency task force among market and prudential regulators, and a formal policy of enhancing penalties for bad actors who use AI to lure vulnerable investors into handing over their hard-earned cash to fraudsters conjuring up deepfake investment schemes using easily and cheaply acquired or adapted generative AI technologies,” Johson said in the statement.

The release of this advisory follows the CFTC’s request for public comment on the use of AI in CFTC-regulated markets that was issued in January.