Keynote Address by Commissioner Kristin Johnson at University of Chicago Law School
Good afternoon. I am grateful for the opportunity to join you today at the University of Chicago Law School. Reflecting on history can provide valuable insights into the future. Nearly 4,000 years ago, Phoenician sailors developed charts and observations of celestial bodies to navigate the seas. As technology evolved, tools like the astrolabe, sextant, chip log, radar, and GPS replaced primitive navigation methods.
Having spoken recently at a blockchain event at the World Economic Forum, I have delved into the rapid advancements in technology. As someone who has worked as a lawyer, academic, and financial market regulator, exploring technological developments in markets is of great interest to me. With the Commodity Futures Trading Commission celebrating its 50th Anniversary, we find ourselves at the forefront of technological advancement, particularly in computing, predictive analytics, algorithmic trading, and digital trading systems.
In recent times, regulatory bodies like the Securities and Exchange Commission have taken steps to modernize market infrastructure and reduce settlement times. Rule amendments have shortened settlement cycles, leading to faster and more efficient trading processes. Market participants are increasingly leveraging technology by migrating data to cloud-based storage systems.
The recent Executive Orders focusing on artificial intelligence (AI) and cryptocurrencies by the new administration signal a commitment to these innovative technologies. As we await further guidance on balancing innovation and market integrity, it is essential to consider the lessons of the past and the value of established regulatory frameworks in adapting to technological changes.
AI and cryptocurrencies have become significant topics in financial markets regulation discussions. Addressing questions about regulatory scope and distinguishing between securities and commodities is crucial. Understanding products and markets is fundamental to effective regulation. For me, this understanding shapes my approach to regulation and oversight.
AI has transformative potential in the financial sector. Firms have been using algorithms and machine learning for decades in various applications. Emerging AI technologies offer more sophisticated risk management tools and trading strategies. Deep learning, particularly neural networks, can replicate complex decision-making processes, enhancing overall efficiency and effectiveness in financial operations.
The landscape of AI use cases continues to expand. AI can streamline operations, automate tasks, and improve decision-making processes in financial services firms. Building on standard algorithms, AI technologies hold promise in optimizing trading strategies, managing portfolios, and assessing risk-return tradeoffs.
As we navigate the ever-evolving realm of technological innovation in financial markets, it is crucial to strike a balance between fostering innovation and maintaining market integrity. Our ability to adapt and leverage new technologies while upholding regulatory principles will be vital in charting the course for the future of financial regulation. Thank you for allowing me to share these insights with you today.
