On March 16, 2022 CFTC Chairman Rostin Behnam delivered the keynote address at the annual Futures Industry Association Conference in Boca Raton, Florida. Chairman Behnam opened his remarks noting the transformative changes our industry successfully navigated and how financial and technological innovations are yet again at our doorstep. He reminisced on how technology and decimalization in U.S. equities over 20 years ago triggered decades of change. These changes included new regulations (Reg NMS, Reg SHO, Market Access Rules), business adaptation (electronic market making, dark pools, smart routers, etc.) and a plethora of new FinTech and RegTech businesses to handle huge amounts of data processed at ever-increased speeds. The point is that financial and technological innovation takes time, and sometimes years of coordination and planning are necessary to ensure a safe and orderly transition.
Today, the CFTC is similarly taking a “thoughtful and steady” approach to the challenges presented by financial and technological innovations, with the stated goal of supporting “responsible innovation” while preserving market integrity and protecting investors. Of critical importance to compliance and surveillance teams, Chairman Behnam reminded us that “this ongoing transformation will not distract the CFTC from staying true to its historic responsibilities.” In other words, existing norms and rules still apply, especially as it relates to best practices and enforcement.
In laying out its enforcement priorities, Chairman Benham noted “[CFTC] Surveillance staff are surgically focused on their analysis of trading for any manipulative, inappropriate or disruptive conduct” and “are using every tool the agency has to ensure that commodity markets continue to fairly and transparently serve the intended price discovery and risk management function.”
The chairman noted that the CFTC is moving to leverage “advancements in AI, machine learning, and data analytics” to “provide our already robust surveillance, enforcement, and monitoring capabilities with automated systems.” Heclosed his remarks with an oft-repeated call for a “culture of compliance” and reminded the audience that the “CFTC will continue its proactive approach in using our existing enforcement authority to its fullest extent.”
ViP: With a keen eye and product roadmap focused on new products, market participants and workflows, Eventus continues to offer best-in-class solutions to meet today’s regulatory requirements. Our Designated Contract Market, Futures Commission Merchant, Swap Execution Facility and Swap Dealer clients rely on our solutions to help meet their regulatory obligations under the CFTC Core Principles and CFTC and NFA supervision frameworks. A “culture of compliance” means being proactive in your coverage and thorough in the accuracy, completeness and timeliness of your surveillance reviews. Eventus’ Validus platform offers a full suite of market manipulation and disruptive behavior alerts along with tools to perform oversight and supervision of the alert review process. While legacy surveillance systems rely on threshold calibration to control alert volume, the next generation technology used by Validus offers agility and scale through anomaly detection and robotic process automation. Although we may be standing on the “precipice of transformative change,” it’s imperative for compliance and surveillance teams to continue meeting today’s regulatory obligations.