Thursday, May 02, 2024

Groups press CFTC on risks of AI in financial markets, caution on overregulation

By Lene Powell, J.D.

Accelerated use of “black box” artificial intelligence in financial markets could cause oversight challenges and market volatility, consumer groups warned in a comment letter to the CFTC. AI could also increase “herding” behavior and cybersecurity risk due to market dominance by a small number of AI technology companies. Better Markets exhorted the CFTC to address AI risks with “strong, targeted rules, aggressive enforcement, and ample expertise and resources.”

But industry groups FIA, SIFMA, and the U.S. Chamber of Commerce urged the CFTC to exercise regulatory restraint, saying that financial markets have been using AI for some time and existing regulatory frameworks have successfully adapted to technological change in the past. The associations asked the CFTC to take a principles-based approach and engage further with market participants.

The feedback was in response to a CFTC request for comment on AI use and risks in CFTC-regulated markets. The CFTC is collecting information as part of a broader staff effort to monitor the adoption of AI in CFTC-regulated markets, including machine learning and other uses of automation.

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