MFA Comments on CFTC-Regulated Use of AI in Derivatives Markets
The Managed Funds Association (MFA) sent a comment letter to the Commodity Futures Trading Commission (CFTC) outlining how it should approach the use of artificial intelligence (AI) capabilities in the derivatives market.
The MFA stated that its suggestions are intended to protect markets and investors without limiting innovation, competition, or alternative asset managers’ capacity to create returns for institutional investors.
“AI tools used by alternative asset managers enhance competition, reduce costs, and improve market efficiency,” said Bryan Corbett, MFA president and CEO. “MFA’s AI recommendations will ensure the CFTC can address concerns it might have about the use of the technology without harming innovation, markets, or investors.”
MFA believes the CFTC’s present regulatory framework is well-suited to current and foreseeable AI applications. The CFTC’s technology-neutral framework effectively focuses on individual actions rather than technologies, and officials stated that this approach has served the public interest well.
The CFTC’s technology advisory committee released a report last week on AI and financial markets. The Committee offered five recommendations and proposed the CFTC to support current AI efforts led by the White House and Congress.
“Given the collective decades of AI experience of Committee members, their findings regarding the need for responsible AI practices, as well as the importance of the role of humans, governance, data quality, data privacy, and risk-management frameworks targeting AI-specific risks, should be taken seriously by the financial services industry and regulators,” said CFTC Commissioner Goldsmith Romero.
One of the proposals was for the CFTC to organize a public roundtable discussion, and CFTC staff should directly engage in outreach with CFTC-registered businesses to seek assistance and gather new insights into the most common business activities and types of AI technologies in the industry.
In response to a call for input from the industry, the MFA stressed that although the use cases for AI are likely to evolve, the technology has already demonstrated the ability to yield efficiencies and yield benefits for managers. The industry body is urging the Commission to avoid actions that could “stymie the development of new technological tools” that could benefit investors.
