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Introduction

On December 5, 2024, the Commodity Futures Trading Commission (CFTC) released a staff advisory focusing on the use of artificial intelligence (AI) among entities regulated by the CFTC. This advisory follows a Request for Comment issued a year earlier, which received 26 responses and informed the CFTC’s guidance.

The advisory clarifies that no new compliance obligations are imposed on derivatives market participants using AI solutions; rather, it emphasizes the necessity for registered entities to comply with existing regulations, whether they utilize AI or other technologies.

AI Risk Assessment

According to the advisory, all CFTC-regulated entities are expected to conduct risk assessments on their use of AI, updating policies, procedures, and controls as necessary to align with the Commodity Exchange Act (CEA) and CFTC regulations.

AI Use Cases

The advisory outlines various use cases for AI in different areas including:

  • Order Processing and Trade Matching: DCMs may leverage AI to anticipate trades, improving efficiency.
  • Market Surveillance: AI could assist in monitoring for rule violations and trading abuses.
  • System Safeguards: Entities are encouraged to maintain robust risk management and security practices.
  • Notifications: Changes impacting automated systems must still be reported.
  • Member Assessment: AI can facilitate compliance monitoring for clearing members.
  • Settlement Processes: Employing AI to streamline validations and identify trading anomalies.
  • Risk Management and Compliance: AI’s role in managing risk related to derivatives could become essential.
  • Customer Protection: Ensuring compliance when using AI for fund management.

Statement from Commissioner Johnson

Commissioner Kristin N. Johnson called for enhanced supervision regarding AI use, advocating for policies addressing AI-related fraud and establishing an AI Fraud Task Force.

Key Takeaways

The advisory signals ongoing engagement by the CFTC on AI regulation and stresses that while it does not create new obligations, its expectations should be taken seriously by market participants. Proper documentation and risk assessments are crucial as the use of AI grows within the industry.

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