- MFA provides recommendations to CFTC on AI tools in derivatives markets.
- AI tools benefit markets, reducing costs, enhancing efficiency, and improving price discovery.
- Recommendations prioritize market and investor protection without stifling innovation.
- CFTC urged to leverage existing regulations, remain technology-neutral, and recognize AI’s evolving potential.
Main AI News:
In a recent comment letter, the Managed Funds Association (MFA) provided comprehensive recommendations for the Commodity Futures Trading Commission (CFTC) regarding the utilization of artificial intelligence (AI) tools within derivatives markets. This correspondence comes as a response to the CFTC staff’s call for input concerning the integration of AI in CFTC-regulated markets.
The deployment of AI tools among alternative asset managers has proven advantageous for derivatives markets, managers, and investors alike, yielding reductions in costs, enhancements in market efficiency, and improvements in price discovery. MFA’s recommendations on AI are meticulously crafted to safeguard markets and investors while simultaneously fostering innovation, competition, and the capacity of alternative asset managers to deliver returns for their stakeholders, which include pensions, foundations, and endowments. Furthermore, these recommendations align harmoniously with the CFTC’s conventional principles-based approach to financial regulation.
MFA advocates that the CFTC, in addressing any potential challenges arising from the use of AI in derivatives markets, should:
- Leverage existing regulations to confront possible concerns associated with AI tools.
- Maintain a technology-agnostic stance and prioritize the regulation of market activities rather than specific tools.
- Recognize the substantial benefits that AI advancements have brought to markets, investors, and managers, understanding that this technology is continuously evolving and holds the potential for significant future benefits.
According to Bryan Corbett, President & CEO of MFA, “AI tools utilized by alternative asset managers foster competition, drive down costs, and enhance market efficiency. MFA’s AI recommendations will empower the CFTC to address any apprehensions it may harbor regarding the adoption of this technology, all while preserving innovation, market integrity, and investor interests.“
Additionally, MFA’s comment letter underscores the adequacy of the CFTC’s existing regulatory framework in addressing both present and potential applications of AI tools. It highlights that the CFTC’s technology-neutral approach effectively targets specific market activities rather than fixating on particular technologies, a strategy that has historically served the public interest admirably. While acknowledging the ongoing evolution of AI applications, the letter emphasizes the demonstrated capacity of this technology to unlock efficiencies and deliver benefits. Consequently, while urging the CFTC to ensure the sufficiency of its regulatory framework in governing the current marketplace, MFA advises against any actions that could inadvertently impede the development of new technological tools capable of augmenting human capabilities and maximizing benefits for investors.
Conclusion:
The Managed Funds Association’s guidance underscores the pivotal role of AI in shaping derivatives markets. By prioritizing a balanced approach that fosters innovation while safeguarding market integrity, regulators can cultivate an environment conducive to sustainable growth and efficiency in financial markets.
