As the fortunes of the U.S. stock market, and increasingly the economy, become more closely tied to the development of AI, U.S. derivatives regulators are grappling with developing a derivatives market for trading the computing power that’s at the heart of AI models.
The U.S. Commodity Futures Trading Commission (CFTC) launched a consultation Wednesday that seeks input on how the derivatives markets in computing power (compute) should be supervised by regulators. Among other things, the CFTC is seeking comment on market oversight, market manipulation concerns, investor protection and considerations for cash and futures markets in compute.
The consultation is explicitly tied to the growth of AI, which has transformed computing power into a “scarce, capital-intensive commodity,” it said — leading to the potential creation of an emerging asset class involving derivatives tied to the price of access to compute.
Against that backdrop, the CFTC said that it’s soliciting feedback on the factors that derivatives markets and regulators should consider when listing “compute derivatives.”
Currently, these markets are highly fragmented, and transactions largely occur in bilateral, over-the-counter deals that are also highly opaque, it noted. Moreover, there isn’t yet a consensus on the development of an underlying compute commodity.
At this point, the market for compute doesn’t exhibit sufficient liquidity, standardization or fungibility to be considered a commodity, it said — but it suggested that this consultation may help inform efforts to standardize compute as a commodity that’s needed to underpin the development of a derivatives market.
“The commission recognizes that compute derivatives are a comparatively new and evolving class of products, and believes responses from industry participants may enable it to advance the standardization of such products in a manner that promotes transparency, liquidity and responsible innovation,” it said.
In the meantime, the existence of dominant market players that have the power to influence the pricing of compute lends itself to an elevated risk of unfair markets that are susceptible to market manipulation.
The consultation also seeks feedback on considerations for trading in these markets.
“America cannot win the AI race without a robust derivatives market for compute,” said CFTC chairman, Michael Selig, in a release. “This request for comment is the first step toward establishing clear rules of the road for American compute markets.”
The consultation will be open for 60 days following its publication in the Federal Register.