CFTC chief poses questions about policing AI but calls it a road to 'autonomous trading'

The U.S. Commodity Futures Trading Commission has embraced recent financial technology developments, including artificial intelligence, while acknowledging significant regulatory challenges. Chairman Mike Selig highlighted the transformative potential of superintelligence (SI) in financial markets, suggesting it could expand access to sophisticated financial tools and create new economic activity.

Selig has mandated that the term "super intelligence" be used instead of "artificial intelligence" within the agency, calling the latter term inaccurate. He compared SI's potential impact to that of generational technologies like the printing press, steam engine, and internet, noting its role in advancing autonomous trading systems.

Regulatory Challenges

Despite embracing AI, Selig raised critical questions about how regulators will manage the influx of computer agents in trading. He posed scenarios involving autonomous trading agents, questioning whether developers would need registration and who would be liable if systems malfunctioned.

The regulator also expressed concerns about identifying the entities behind non-human trading systems, suggesting potential need for new "know-your-agent" (KYA) identification requirements beyond traditional know-your-customer protocols.

Crypto as a Model

Selig suggested that cryptocurrency markets could provide a regulatory framework for addressing AI trading challenges. The CFTC has previously navigated similar issues with crypto assets, working to provide clarity for software developers and entrepreneurs regarding regulatory requirements.

Brett Harrison, CEO of AI derivatives exchange Architect and former president of FTX U.S., emphasized how AI technology is democratizing trading capabilities. He noted that SI tools are enabling more market participants, from retail to institutional investors, to use algorithmic trading in derivatives markets.

The CFTC continues to address emerging market issues through roundtables, with plans for a December 15 meeting on 24/7 trading, following similar discussions by the Securities and Exchange Commission last month.