FIA Sets Forth Five Core Principles in Enhancing CFTC Market Surveillance

In a response to a request by the CFTC’s Technology Advisory Committee for comment on how best to develop a 21st century surveillance system, the Financial Industry Association (FIA) and the FIA Principal Traders Group submitted a comment letter this week setting forth five core principles for modernizing market surveillance. In the comment letter, Walt Lukken, president and CEO of the FIA, urged the CFTC to rely heavily on existing resources moving forward, even as it “leverage[s] the evolving and changing technological landscape and reform[s] its surveillance and oversight mission in a significant and technologically-adept way.”

The FIA suggested that the CFTC approach surveillance modernization in a manner consistent with its longstanding practice of delegating front-line surveillance responsibilities to the exchanges themselves and that the regulatory body avoid building new systems that replicate those built or commissioned by existing exchanges. Even in implementing new enhanced cross-DCM surveillance routines, the FIA contended, the CFTC could utilize existing large trader and daily transaction reports to test and validate these processes. Additionally, the FIA stressed the importance of increasing the technical and analytical expertise of the CFTC staff through training and targeted hiring, and encouraged the CFTC to maintain data privacy as a priority in developing new market surveillance systems.