Comment Text:
March 26, 2024
Christopher Kirkpatrick, Secretary
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581
Re: Request for Comment on the Use of Artificial Intelligence in CFTC Regulated Markets
Dear Mr. Kirkpatrick,
Thank you for the opportunity to comment.
Why such fear of AI? Why is AI treated differently from other computer based systems? Why is it ok to derive a vol curve using a cubic or higher order (up to 12) spline but not a million dimensional fit? Isn’t the current state of AI, ignoring the marketing hype, just a million dimensional fit? Is using an algo with a random() function ok? (Let’s ignore the difficulty of creating a truly random function on today’s computers.)
It is hard to fathom why the “firefly” objects, unless it’s because she or her sponsors cannot figure out a way to reverse engineer for profit a particular NASDAQ order type.
Why is the “firefly” complaining to the CFTC about a NASDAQ equity order type? Does the CFTC have jurisdiction over a curve-fitted algo used by NASDAQ? Is there any requirement for ANYBODY to use that order type? Don’t firms have pre-trade and post-trade analytics which tell them how well they’ve done with any venue and any order type?
You feel that Dynamic M-ELO is disadvantageous to you - don’t use it! Simple! Would “firefly” feel better with a Random M-ELO? Why?
With so many venues and so many order types, users have a choice. Venues using AI are innovators. You don’t like their implementation? Don’t use it. Or, as IEX and others have done before, create your own venue; create your own order types - even ones that give breaks to those who are too lazy or too cheap to invest in faster and better CPUs.
As for the argument of fairness, let’s look at a simple example. The market is 45.01 - 45.03. “Firefly” would argue that a fill at 45.02 is fair to both, but is it really? What if one side gets PFOF? Then the PFOF side did a lot better than the non PFOF side. What if one side is a huge trader in the stock on that venue and gets a rebate on all trades over a threshold? Is 45.02 still fair? Perhaps 45.0179 is “fair?”
Die Luft der Freiheit weht.
Auf wiedersehen,
Fliegenklatsche
