CFTC Commissioner Quintenz Promises New Approach To Regulating Algorithmic Trading

CFTC Commissioner Brian Quintenz explained CFTC efforts to facilitate FinTech development and promised a "reset" of the CFTC's approach to regulating algorithmic trading. In remarks before the Symphony Innovate 2017 Conference in New York, Mr. Quintenz said that new technology presents new risks, so regulatory leadership must prioritize engagement with the FinTech community to encourage technological advancement and ensure that regulatory efforts keep pace with innovations.

Mr. Quintez highlighted LabCFTC as an initiative that makes the CFTC "more accessible" to FinTech companies. He stated that the initiative informs the CFTC's understanding of how emerging technologies interact with existing rules and helps guide future policy development. LabCFTC consists of two major elements: (i) GuidePoint, which allows FinTech companies to consult with the CFTC regarding the regulatory implications of particular technological innovations, and (ii) CFTC 2.0, in which the CFTC seeks to adopt new technologies to bolster its regulatory efforts (see previous coverage). He noted that a legal barrier prevents the CFTC from "demo-ing" technology, but expressed hope that legislative action – spearheaded by Congressman Patrick McHenry (R-NC) – can help to solve this issue. Finally, Mr. Quintenz said that LabCFTC also supports CFTC efforts to coordinate with international regulators on issues related to FinTech.

Mr. Quintenz explained that the Technological Advisory Committee exists to provide guidance on important technological advances and corresponding regulatory challenges. He highlighted "Autonomous, Algorithmic Trading" as an area that presents significant issues. For example, the difficulties surrounding the determination of intent when evaluating algorithmic trading present a hurdle for regulatory oversight. Mr. Quintenz characterized Regulation AT as a "missed opportunity." He asserted that poorly tailored terminology led to significant flaws, cast a net that was too wide, and ignored the nuances of classifying trading methods. He argued that the CFTC re-proposal of Regulation AT was inadequate, and said that the CFTC needs to reset its stance on the issue. Mr. Quintenz also said that the CFTC "source code repository" plan, which would mandate that regulated entities provide the CFTC with proprietary code, is "dead."

Mr. Quintenz also spoke about bitcoin and blockchain, explaining that the CFTC considers bitcoin a commodity. As a result, bitcoin...

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