WASHINGTON The top U.S. derivatives regulator is abandoning its analog-approach to regulation in preparation for a digital makeover designed to bring its antiquated rulebook up-to-date and more in line with the brokerages it oversees.
Acting Commodity Futures Trading Commission Chairman J. Christopher Giancarlo said Wednesday he had launched a financial technology initiative known as "LabCFTC," which aims to benefit fintech firms and the agency by aligning the CFTC's regulations with today's fast-paced digital trading environment.
The CFTC's rule book was written decades ago when much of the futures markets involved floor pits and open outcry trading.
“LabCFTC is intended to help us bridge the gap from where we are today to where we need to be: 21st century regulation for today’s digital markets," Giancarlo said in prepared remarks before the New York FinTech Innovation Lab.
With Giancarlo's announcement Wednesday, the CFTC became the latest in a string of global regulators that have deepened their focus on the impact of new technologies on the companies they supervise during the past year.
Many, including the UK’s Financial Conduct Authority, have launched initiatives similar to LabCFTC to increase engagement with the country’s so-called “fintech” businesses.
Giancarlo said LabCFTC's mission is two-fold.
First, it will step up the CFTC's engagement with the fintech sector through a program called "GuidePoint," which will have its own dedicated office and be housed in the regulator's lower Manhattan office.
That program will work to ensure that responsible innovation is fostered and that the CFTC does not unduly impede it. It will partner on research with the fintech sector and provide fintech innovators with guidance on CFTC rules, he said.
Secondly, the CFTC will launch a "CFTC 2.0" initiative, designed to keep the agency on top of developing technology trends, and ultimately, be prepared to adapt as technology evolves so it can effectively police markets.
"We will look to explore ways to use fintech to enhance CFTC functions and duties," Giancarlo said.
The program, for instance, could explore the use of blockchain technology, or a distributed record of data maintained by a network of computers on the internet, to collect or distribute CFTC reports.
Sharon Bowen, the CFTC's sole Democratic commissioner, praised the effort, and called on the president and Congress to support expanding the agency's current budget of about $250 million.
President Donald Trump is expected to roll out a proposed federal budget later this month.
"We need to invest in people and technology to understand and police this ever-changing marketplace," Bowen said in a statement.
(Reporting by Sarah N. Lynch in Washington and Anna Irrera in New York; Editing by Andrew Hay)