The chairman of the Commodity Futures Trading Commission (CFTC), Christopher Giancarlo, has made a statement on 7 November saying that technological advances, including Distributed Ledger Technology (DLT), could help regulators better oversee trading markets.
He gave the speech, “Quantitative Regulation: Effective Market Regulation in a Digital Era” at the Fintech Week conference at Georgetown University Law School where he explored a range of emerging digital technologies, including DLT, big data, automated data analysis, and artificial intelligence (AI) and their potential impact on markets, trading and the financial world.
In relation to trading markets, he said, “we begin to see a world where the majority of standard tasks are managed by machines” and that when combined with DLT, this kind of automation offers an opportunity to reduce costs and improve trade matching, processing, clearing and settlement.
Giancarlo also suggested in his talk that “high-order computing technology” will be “ubiquitous” in the commodity and financial derivatives markets, and that the CFTC and other regulators have to keep pace with the changes, especially in the application of AI.
He also wants the CFTC to be proactive in “regulatory data collection, automated analysis, and data-driven policy application, and eventually become a quantitative regulator.” However, he was keen to point out, “being a quantitative regulator does not mean replacing human judgment and market intelligence; it means reinforcing it.”
He said: “It means freeing agency staff from repetitive and low value tasks to focus on high value activities that require their expert judgment and domain knowledge. It means marshalling quality data that is efficiently and, perhaps, algorithmically analyzed upon which human judgement can be deployed, unfurled and expanded.”
Envisioning a future where DLT helps regulators analyse data and real-world outcomes, he also told his audience, “We can also envision the day where rulebooks are digitized, compliance is increasingly automated or built into business operations through smart contracts, and regulatory reporting is satisfied through real-time DLT networks.”
In concluding, he said, as he has previously, “there is a need for a legally sound, fast process of sharing information between the agency and fintech innovators, “especially in the area of blockchain.”