The Commodity Futures Trading Commission (CFTC) is to boost its market surveillance and fraud detection capabilities across traditional and digital asset classes by using surveillance technology supplied by Nasdaq, the Washington DC-headquartered regulator has today announced.
The CFTC oversees a broad spectrum of derivatives markets, including fixed-income, commodities and currencies, and event-based markets. The Digital Asset Market Clarity Act (Clarity Act), which has not yet been signed into law, would expand the CFTC’s oversight of cryptoasset markets.
‘The growth in both traditional and new markets and products, combined with innovations in market structure, such as the launch of continuous trading hours, require increasingly sophisticated tools to prevent and detect potential market abuse,’ the CFTC states in a press release (27 August).
Nasdaq’s Market Surveillance platform will support the agency’s mission to promote market integrity as the CFTC ‘embraces an expanding regulatory remit,’ the regulator states, explaining that the platform ‘enables integrated monitoring across CFTC markets and provides resilient and scalable surveillance capabilities.’
“As our markets continue to evolve and integrate new technology, it’s critical that the CFTC stays ahead of the curve,” CFTC acting chairman Caroline D Pham said.
Replacing ‘antiquated’ system
The ‘upgraded’ technological capabilities follow a pledge made by Pham in March to replace an “antiquated” surveillance system “dating back to the 1990s”. In a speech kicking off a procurement process for the CFTC to “obtain, for the first time, a real-time market surveillance system, which can be purchased off-the-shelf and which our regulatory counterparts around the world, including even in developing economies, already have”
She described the agency as “lack[ing] a modern automated market surveillance system that can provide real-time alerts and perform cross-market analytics of both futures and swaps transactions to better identify potential trading activity involving fraud, manipulation or abuse.”
In this week’s press release, she said that Nasdaq Market Surveillance would provide the CFTC with “automated alerts and cross-market analytics that will benefit each of the CFTC’s operating divisions and better protect our markets from fraud, manipulation and abuse.”
“This new suite of solutions will also improve efficiency in analysing market trends and identifying unusual or disruptive trading activity so that our lean and talented staff can take appropriate action more quickly,” she continued.
“Today’s financial markets demand advanced surveillance technology that can adapt to rapid regulatory evolution and emerging asset classes,” said Tal Cohen, president of Nasdaq, which is best known a US stock-market index. “As both an owner and operator of heavily regulated markets, as well as a technology provider to financial services companies worldwide, Nasdaq occupies a unique position at the intersection of innovation and regulation.”
Pham on way out
Pham, who was named as the CFTC’s acting chairman on 20 January, announced in May that she would be returning to the private sector after Brian Quintenz is confirmed as chairman.
President Donald Trump nominated Quintenz, a Republican former CFTC commissioner and head of crypto policy at venture-capital firm a16z (Andreessen Horowitz), to run the CFTC in February. He was a CFTC commissioner between 2017 and 2021.
The CFTC is typically led by five commissioners appointed by the President. Just yesterday (26 August), commissioner Kristin Johnson announced that she will depart on 3 September. Her exit, first announced in May, will leave Pham as the sole commissioner in post.
The CFTC launched a ‘crypto sprint’ earlier this month (1 August) aimed at helping to implement recommendations in a President’s Working Group on Digital Asset Markets report (published 30 July).
In a major speech in Washington DC the day after the 166-page report was published, Securities & Exchange Commission chairman Paul Atkins launched ‘Project Crypto’ (31 July), which he described as “Commission-wide initiative to modernise the securities rules and regulations to enable America’s financial markets to move on-chain” (meaning on ‘blockchain’ – the technology that underpins and enables cryptocurrency).
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