United States: CFTC Chief Innovation Officer Describes Development Of LabCFTC Initiative

CFTC Chief Innovation Officer and Director of LabCFTC Daniel Gorfine explained the purpose of the LabCFTC initiative and the agency's new orientation toward FinTech.

In remarks before the 33rd annual FIA Futures & Options Expo in Chicago, Illinois, Director Gorfine stated that FinTech covers broad swaths of financial activity and is characterized by rapid pace of innovation driven by increases in computing power, efforts to disintermediate traditional actors and entry of a variety of non-traditional institutions from different industries into the financial space. He noted the ubiquity of the internet in the current wave of innovation.

While recognizing that FinTech benefits the public in a variety of ways, Director Gorfine warned that innovation is accompanied by risk. In particular, he highlighted that technological disintermediation of historical actors and new business models pose challenges to current regulation and raise new hazards around data security, governance, accountability and new asset classes. Accordingly, regulators must strike a balance between stifling innovation and properly considering attendant regulatory adjustments.

Director Gorfine described the mission of LabCFTC as building "a 21^st century regulator" and emphasized that it is housed in the Office of General Counsel to leverage expertise in managing the interface between innovation, regulatory modernization and existing rules. Director Gorfine outlined the core components of the LabCFTC initiative as comprising: (i) GuidePoint, a dedicated point of contact for innovators to consult with the CFTC regarding their businesses and potential points of friction, (ii) CFTC 2.0, in which the CFTC seeks to understand and adopt new technologies, and (iii) DigitalReg, which will be an internal resource to keep staff members abreast of FinTech developments to develop tools and culture to facilitate innovation.

Director Gorfine shared several updates on LabCFTC progress, including engagement with FinTech companies, release of the first in a series of LabCFTC primers, and international and domestic collaborative efforts.

Commentary / Jeff Robins

Given the CFTC's limited budget, it is good to see a coordinated effort at addressing technological change. Past efforts at regulation in the Dodd-Frank era, particularly in the spaces of execution and clearing, trade reporting and recordkeeping requirements, have been hampered by inadequate attention to technology and data considerations. Director Gorfine's emphasis on balancing facilitation of innovation with ensuring market integrity is also welcome and on point.

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