FIA Cautions CFTC on Regulation of AI
Commentary by Chuck Hollis
The Futures Industry Association, the FIA Principal Traders Group, CME Group Inc. and the Intercontinental Exchange Inc. (collectively "the Associations") urged the CFTC to take steps to better understand potential risks before regulating the use of artificial intelligence in CFTC-regulated markets.
In response to the CFTC's request for comment, the Associations argued that "the CFTC’s consideration of AI should be focused on the application of the technology within the context of a particular use case, not the technology as a whole." The Associations said that this "framework" would allow the CFTC to "support the CFTC’s long-standing regulatory focus on risks while remaining technology neutral." The Associations suggested that in many cases, existing rules are sufficient. They stressed the importance of flexibility and adaptability in regulatory practices.
The Associations argued:
- that the CFTC should consider AI use cases and/or perceived risks in the context of existing rules and guidance. (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.)
- that attempts to regulate the underlying technology rather than through use cases, would necessitate the development of a comprehensive definition of AI "[which] would be very challenging and require considerable resources;" and
- that governance and controls around the use of AI should depend upon the type, size and complexity of the business. (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.)
The Associations encouraged the CFTC to continue gathering information from its various advisory committees, industry participants, academics and the broader public.
Commentary
While AI is not necessarily a new technology, the acceleration of its capabilities creates new opportunities for these tools. Regulators and companies should both focus on the use of these tools and the good they can create and harm they can cause. As the Associations note, there are numerous laws and regulations already on the books that are applicable to the improper use of the AI tools. Any new regulation framework developed should focus on the potential that is not already addressed by the current laws and regulations. While at the same time, companies need to implement governance processes and frameworks that assess each AI use case and develop guiderails and restrictions to mitigate the risk of any harm.