Summary

The World Federation of Exchanges (WFE) welcomes the opportunity to comment on the US Treasury’s approach to AI. As the global industry association for exchanges and clearing houses, we represent the providers of over 250 pieces of market infrastructure that see more than $124tr in trading pass through them annually (at end-2023). 

Exchanges and CCPs’ extensive experience with technology makes them well-placed to offer views on the development of AI. While these technological innovations and the associated concerns about managing generative AI are significant, it is important to remember that, as trusted third parties providing secure and regulated platforms for trading securities, our members are already carefully scrutinising tools and establishing controls to govern AI use.

The WFE advises the Treasury that:

  • The definition of AI should be precisely tailored to avoid including more than what is necessary. A broad definition would create onerous restrictions and not be proportionate to the risks that different tools have.
  • A definition of AI should focus on computer systems with the ability to make decisions or predictions based on automated, statistical learning.
  • AI deployment by malicious actors is an emerging type of risk associated with this technology which financial services firms are well aware of and are tackling.
  • Whilst traditional risk management techniques can be used to manage risk of AI systems, more work needs to be done to develop AI specific risk management tools.
  • Third parties will be valuable to help develop AI tools and risk management tools, but Treasury is right to be cognisant of the risks around big tech firms utilising their market dominance.
  • Regulatory uncertainty is a key concern amongst our members. Regulators should focus on outcomes and use sound judgment, fostering collaboration to support innovation and competitiveness in financial markets.
  • Our members favour a principles and risk-based approach to developing a regulatory framework, where requirements are proportional to the level of risk associated with AI applications. This needs alignment among the various financial regulators and must be compliant with international standards.
  • Ultimately, government policy should encourage modernisation by promoting the use of cutting-edge technologies like AI, cloud computing, and machine learning in capital markets. This enhances market dynamics, and provides better services to consumers.

AI use cases amongst our members are numerous and varied. Among these, AI can help exchanges and CCPs to:

  • detect fraud,
  • undertake market surveillance,
  • facilitate trade execution,
  • manage risk,
  • optimise settlement,
  • provide customer support, and enhance compliance.