Comment Text:
Some regulations related to disruptive trading practices hinge upon intent on the part of the trader. This is the case, for example, with spoofing. Many artificial intelligence and machine learning (AI & ML) models, which are increasingly being deployed for algorithmic trading, can be characterized as "black boxes" that produce outputs that are neither explainable nor interpretable.
In the attached paper which we published in Law360 in 2019, we imagined a scenario in which a trading program posts a pattern of quotes consistent with spoofing, regardless of the intent of its creator.
With the rapid advance in the capabilities of AI & ML models in recent years, this type of scenario is becoming increasingly plausible, if not likely. As such, we believe that the CFTC should consider such possibilities and proactively provide appropriate clarification of its regulatory stance to market participants.
