Opening Statement of Chairman Heath P. Tarbert Before the Technology Advisory Committee Meeting
October 3, 2019
Good morning, and thank you all for being here. I would especially like to thank Commissioner Quintenz and his staff for convening this meeting of the Technology Advisory Committee (TAC). My thanks also to Meghan Tente, the Designated Federal Officer for the TAC, for organizing the meeting. And of course, thank you to the TAC members for traveling from near and far and taking the time to share your valuable perspectives.
Role of Advisory Committees
Let me start by saying thank you to Commissioner Quintenz for his active engagement with stakeholders on these highly technical issues. In particular, I applaud Commissioner Quintenz’s drive for actionable, practical advice from the advisory committee and the efforts of the committee members to deliver that advice.
Our advisory committees should be a way for the CFTC to engage with market participants and other stakeholders in our markets. But the real value of advisory committees is the ability to present concrete recommendations to the Commission. I look forward to hearing recommendations on how to improve our regulations and our markets at this meeting and future meetings.
Engagement with Industry
This advisory committee has a vital role to play in the operation of our agency. We regulate markets that are at the cutting edge of technological innovation. As an agency, we do not always have the technical expertise that our market participants have. We can keep pace with developments in our markets only through dialogue with people active in those markets and driving those developments.
The topics for today’s TAC meeting reflect the rapid technological transformation taking place in our derivatives markets. Automated trading systems, stablecoins and digital assets, distributed ledger technology, and cybersecurity—these are exactly the type of issues where we must gain insight from industry.
Innovation in our Markets
Our interest in these issues stems from our larger mission.
Our job is to ensure that our rules protect market integrity while fostering innovation. To be sure, that requires a bit of a balancing act. Market integrity is about protecting customer assets, making sure the markets function, and making sure everybody knows the rules. If our markets are good enough, there is no need to fix anything. But “good enough” is not the ultimate objective. Our markets should always be striving to improve.
Fostering innovation, on the other hand, is about letting change happen in order to find a better way. But innovation can be messy. Some innovations are a dead end and do not always live up to their promises. Other innovations create more problems than they solve. And any innovation can take a long time to realize its potential. Innovation also sometimes bears risk. If the new mousetrap is better at catching mice but burns down the house, it is not a better mousetrap.
So how can a regulator strike the right balance between maintaining the integrity of the system while fostering innovation? Fortunately for us, the best way to strike this balance is through a principles-based approach to regulation—a hallmark and unique feature of the CFTC’s regulatory regime. We can set the destination but leave it to our registrants to find the best path to get there. This approach allows flexibility for our markets to take advantage of new technology and other advances but still retains fundamental regulatory mandates so everyone knows what is expected of them.
If we the regulator better understand the innovations in our markets, we can make sure we have the right mix of principles and rules to strike that balance.
I look forward to hearing the TAC members’ views on these important issues. Your perspectives are likely to be invaluable to the Commission and staff as we continue to work to refine our regulatory framework as to 21st century commodities.