Commissioner Kristin N. Johnson’s Keynote Remarks at RegHub Summit London 2025

Recent years have seen a significant shift towards enhancing regulatory compliance and governance in financial markets through the use of advanced technologies like artificial intelligence (AI). The integration of machine learning algorithms and other AI technologies has revolutionized predictive analytics and enabled more efficient supervision and compliance monitoring.

In the United States, financial regulation has traditionally relied on a three-dimensional approach to regulatory compliance. Firstly, market participants are expected to monitor themselves, demonstrating a commitment to compliance and reporting any instances of disruption or non-compliance. Secondly, there are formal and informal requirements imposed on firms operating as critical market infrastructure resources. Entities like exchanges and clearing organizations play a key role in maintaining market stability and integrity. Finally, financial market regulators supervise markets and enforce compliance expectations, creating a balanced governance and compliance framework.

One of the main challenges facing regulatory bodies is ensuring that firms keep pace with evolving technological advancements. The use of AI in compliance and surveillance processes has the potential to streamline operations, reduce costs, and improve overall efficiency. Advanced AI technologies, such as neural networks and generative AI, have paved the way for broader adoption of AI across various aspects of financial markets regulation, from front office operations to reporting and monitoring obligations.

Recognizing the transformative potential of AI in financial markets, regulators worldwide have been actively exploring the benefits and limitations of integrating AI into compliance and surveillance mechanisms. In the United States, the Commodity Futures Trading Commission (CFTC) has been at the forefront of this initiative, working closely with federal regulators and market participants to understand the implications of AI adoption in regulated markets. The CFTC recently issued its first request for comment (RFC) on the use of AI in CFTC-regulated markets, reflecting a concerted effort to gather insights and feedback from industry stakeholders.

The adoption of AI in financial markets regulation is not without its challenges and considerations. While AI technologies offer significant opportunities for enhancing surveillance and compliance capabilities, there are concerns surrounding data privacy, algorithmic biases, and the potential for regulatory arbitrage. As regulators continue to explore the possibilities of AI-driven compliance mechanisms, it is essential to strike a balance between innovation and risk mitigation.

Overall, the integration of AI technologies in financial markets governance and compliance represents a significant step towards modernizing regulatory practices and improving market integrity. By leveraging the power of AI, regulators can enhance surveillance capabilities, streamline compliance processes, and adapt to the rapidly evolving landscape of financial markets. As the industry continues to embrace technological innovation, regulatory bodies must remain vigilant and proactive in addressing emerging challenges and ensuring the soundness of regulatory frameworks.