MINUTES OF THE MEETING OF THE 

U.S. COMMODITY FUTURES TRADING COMMISSION'S 

TECHNOLOGY ADVISORY COMMITTEE 

March 27, 2019 

The Technology Advisory Committee (TAC) convened for a public meeting on 

Wednesday, March 27, 2019, at 10:04 a.m., at the U.S. Commodity Futures Trading 

Commission's (CFTC or Commission) Headquarters Conference Center, located at Three 

Lafayette Centre, 1155 21st Street NW, Washington, DC. The meeting consisted of four panels. 

Panel 1 discussed the impact of automated orders on markets, followed by a discussion of a 

principles-based approach to preserving orderly trading on exchanges. Panel 2 discussed 

consensus mechanisms used for virtual currencies and a comprehensive survey of the regulation 

of virtual currencies and other digital assets. Panel 3 discussed the existing cybersecurity 

regulatory landscape, and how regulation can be effectively applied to technological 

developments. Panel 4 discussed the current state of Distributed Ledger Technology (DLT), the 

future of DL T and potential recommendations, and the application of smart contracts and DL T to 

swap markets. 

TAC Members in Attendance 

Richard Gorelick, TAC Chair, Head of Market Structure, DRW Holdings LLC 

Erik Barry, Credit Suisse, Head of Client Platform for Prime Derivative Services 

Christopher Chattaway, Managing Director, Goldman Sachs 

Thomas Chippas, Chief Executive Officer, ErisX 

Paul L. Chou, Chief Executive Officer and Co-Founder, LedgerX 

Charley Cooper, Managing Director, R3 

Gary De Waal, Special Counsel, Katten Muchin Rosenman LLP 

Bryan Durkin, President, CME Group 

Aubree Greenspun, Vice President, Product Development, Nasdaq 

Christopher Hehmeyer, Managing Member, Hehmeyer Trading and Investments 

Mayur Kapani, Chief Technology Officer, ICE 

Brian Knight, Senior Research Fellow, GMU Mercatus Center, Special Government Employee, 

CFTC 

Bradford Levy, Senior Vice President, Global Head of Loans and Chief Executive Officer, 

MarkitServ, IHS Markit 

John Lothian, President and Chief Executive Officer, Jonathan J. Lothian Co. Inc. 

Jennifer Peve, Managing Director, Head of Solutions Business Development and Fin Tech 

Strategy, Depository Trust & Clearing Corporation (DTCC) 

Alexander Stein, Managing Director, Two Sigma Investments LP 

Larry Tabb, Founder and Research Chairman, TABB Group 

Haimera Workie, Senior Director for Emerging Regulatory Issues, Financial Industry Regulatory 

Authority (FINRA) 

Speakers in Attendance 

Mel Gunewardena, Chief Market Intelligence Officer, Market Intelligence Branch, Division of 

Market Oversite (DMO), CFTC 

(Panel 1) 

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Elitza Voeva-Kolev, Market Analyst, Market Intelligence Branch, DMO, CFTC (Panel 1) 

Bryan Durkin, President, CME Group (Panel 1) 

Adam Nunes, Head of Global Business Operations and New Business Development, Hudson 

River Trading LLC (Panel 1) 

Alexander Stein, Managing Director, Two Sigma Investments LP (Panel 1) 

Gary DeWaal, Special Counsel, Katten Muchin Rosenman LLP (Panel 2) 

Peter Van Valkenburgh, Director of Research, Coin Center (Panel 2) 

Kathryn Trkla, Partner, Foley & Ladner, LLP (Panel 2) 

Charlie Mills, Partner, Steptoe & Johnson, LLP (Panel 2) 

Thomas Price, Managing Director, Technology, Operations, and Business Continuity, SIFMA 

(Panel 3) 

Josh Magri, Senior Vice President & Counsel for Regulation and Developing Technology, Bank 

Policy Institute (Panel 3) 

Nina Neer, Director, Technology Operational Risk Management, Credit Suisse (Panel 3) 

Gil Vega, Managing Director and Chieflnformation Security Officer, CME Group (Panel 3) 

Jason Harrell, Executive Director and Head of Business and Government Cybersecurity 

Partnerships, DTCC (Panel 3) 

Shawnna Hoffman-Childress, Global Co-Leader of the International Business Machines (IBM) 

Cognitive Legal Practice, IBM (Panel 4) 

Charley Cooper, Managing Director, R3 (Panel 4) 

Jesse Drennan, Senior Vice President- Global Business Process Engineer Global Foreign 

Exchange and Commodities, The Hong Kong and Shanghai Banking Corporation (HSBC) 

(Panel 4) 

Tara Kruse, Global Head of Infrastructure & Data, International Swaps and Derivatives 

Association (ISDA) (Panel 4) 

CFTC Commissioners and Staff in Attendance 

Brian D. Quintenz, Commissioner and TAC Sponsor 

Rostin Behnam, Commissioner 

Dan Berkovitz, Commissioner 

Dawn D. Stump, Commissioner 

Mike Gill, Chief of Staff to J. Christopher Giancarlo, Chairman 

Daniel Godine, Designated Federal Officer (DFO) and Director, LabCFTC 

I. Opening Remarks 

Mr. Gorfine, the DFO for TAC, called the meeting to order. Commissioner Quintenz 

gave his opening remarks. He welcomed and thanked all committee members for attending and 

specifically acknowledged Mr. Gorelick as the new TAC Chair. Commissioner Quintenz 

previewed the day's agenda, highlighting issues that would be discussed and briefly described 

the panels' guest presenters and special presentations. Regarding the DMO Market Intelligence 

Branch (MIB) staff report entitled, "Impact of Automated Orders in Futures Markets" 

(Automated Order Staff Report) to be presented during the first panel, Commissioner Quintenz 

stated that it would serve as a substantial anchor and reference point in the journey to achieve an 

objective, data-driven understanding of the impact that automated and algorithmic trading play in 

our markets. 

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Next, Mr. Gill, Chief of Staff to Chairman Giancarlo, who was absent due to illness, 

delivered the Chairman's opening remarks. He applauded the TAC on its structure, focus, and 

timeliness in exploring emerging issues and technologies impacting the markets. Mr. Gill 

expressed enthusiasm to hear the guest speakers' insights and feedback, and thanked the MIB 

staff for presenting its Automated Order Staff Report, which is what the Chairman had in mind 

when he conceived the MIB. 

Following Mr. Gill, Commissioners Behnam, Stump, and Berkovitz each gave their 

remarks, respectively thanking Commissioner Quintenz for his leadership. Additionally, 

Commissioner Stump noted her excitement for the MIB Automated Order Staff Report 

presentation, work that she considers to be very helpful for agricultural markets. Commissioner 

Berkovitz made specific points about each of the four upcoming panel discussions: (1) the 

timeliness of considering automated order trading, given its major role in today's financial 

markets; (2) the ABA's strong record of providing thoughtful analysis and recommendations that 

have informed the Commission's regulatory structure; (3) his view, expressed during his Senate 

Agriculture Committee nomination hearing, that data protection and management warrants 

Commission focus going forward; and (4) his enthusiasm, in the wake of recently attending a 

conference about DL T applications in energy markets, for the presentation on how DL T can 

impact and improve market function and Commission oversight. 

Commissioner Quintenz then introduced Chairman Gorelick, who said that he was 

honored and looked forward to working with his TAC colleagues in providing feedback and 

recommendations to assist the Commission, among other things, in being "an effective modern 

regulator." After discussing some meeting housekeeping details, Chairman Gorelick turned to 

Mr. Gorfine, who made the following disclaimer: "[T]he views and opinions expressed in this 

meeting regarding products, entities, and services do not necessarily reflect those of the United 

States Government or the CFTC. Additionally, any reference to such products, entities, or 

services is not an endorsement or recommendation by the United States Government or the 

CFTC." Mr. Gorfine then invited comments from the public about alternative technological 

solutions to address matters discussed during this meeting, and directed the public to the 

Commission website for comment related to submission instructions. 

II. Panel I: Automated and Modern Trading Markets Subcommittee Presentation & 

Special Presentation from DMO 

Chairman Gorelick opened the panel by introducing two OMO staff members, Mr. 

Gunewardena and Ms. Voeva-Kolev, to present the Automated Order Staff Report. Mr. 

Gunewardena explained that the report, which examined nearly 2.3 billion transactions from 

2013 through 2018, reflected the start, not the end, of work on automation; and he then gave the 

floor to Ms. Voeva-Kolev to review the report. 

Ms. Voeva-Kolev began by explaining that, based on interviews with numerous market 

participants trading different commodities, DMO staff recognizes that market participants, aided 

by technology, can place large numbers of transactions for significant volumes. The study 

endeavored to understand what, if any, effect this technology-driven trading had on futures 

markets, by analyzing internal CFTC transactional data to compare manually-placed to 

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automatically-placed orders. The study generally found that: (1) the percentage of 

automatically-traded orders has increased for all commodity futures markets; (2) automated 

orders are smaller in size and have shorter resting times than manual orders; (3) automated 

orders are almost exclusively limit orders; and (4) historical end-of-day price volatility during 

the studied 2013-2018 timeframe has not increased year-to-year at a correlated rate with the 

steady increase in futures markets automated trading ( although this does not imply that 

automated trading has not affected short-term market events). Ms. Voeva-Kolev, using a 

PowerPoint presentation, explained the study's methodology and findings in greater detail, after 

which she answered several questions. 

Ms. Voeva-Kolev's presentation elicited several comments from members and panelists. 

These included comments suggesting potential areas for further analysis. Additionally, Mr. 

Durkin commended the report as validating that automated trading reflected a natural market 

evolution, a point he said the TAC had been emphasizing for a number of years. 

Chairman Gorelick then gave the floor to the subcommittee members, Messrs. Durkin, 

Stein, and Nunes, for discussion of a principles-based approach to preserving orderly trading on 

exchanges. Chairman Gorelick summarized the discussion as affirming the view that U.S. based 

exchanges are currently in compliance with International Organization of Securities 

Commissions (IOSCO) principles, although swap execution facilities (SEFs), due to their unique 

trading mechanisms, present some unique questions, a topic for potential further subcommittee 

consideration. 

Following the presentation, Chairman Gorelick asked members for any questions. There 

being none, the Chairman stated that after a few minutes the meeting would continue with the 

next panel. 

[Break] 

III. Panel II: Virtual Currencies Subcommittee Presentation & Special Presentation 

fromABA 

Following an introduction by Chairman Gorelick, Mr. DeWaal explained that the Virtual 

Currency Subcommittee has been working to understand and formulate recommendations for the 

Commission with respect to cryptocurrency derivatives contract approval through the selfcertification process and for new applicants. He noted that after reviewing comment letters 

submitted in response to the Commission's Request for Input concerning Ether, the 

subcommittee wanted to better understand Ether's likely transition from a proof-of-work to a 

proof-of-stake consensus mechanism, which was a "hot topic" in the comment letters. Mr. 

DeWaal then introduced Mr. Van Valkenburgh to speak on the issue. 

Mr. Van Valkenburgh began his PowerPoint presentation by explaining that consensus 

mechanisms refers to the actual technology to get all of the computers on a peer-to-peer 

cryptocurrency network to agree on the type of things (user onboarding/authentication, 

accounting/recordkeeping, management/oversight) that the operator in a centralized paradigm, 

e.g., Pay Pal, would handle. DLT is such a technology. It is fault tolerant because data requiring 

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consensus is stored redundantly on every computer on the network and visible to everyone. In 

lieu of transaction timestamping, consensus on an open-DLT network is reached on whether a 

batch of transactions, i.e., a block, happened before another; and this is done by requiring that 

each block incorporate a piece of data, i.e., the output from a mathematical hash function, from 

that which preceded it. Both proof-of-work and proof-of-stake consensus systems employ a 

provably fair lottery for picking who is going to be mining the next block or creating the next 

block in the blockchain. In contrast to proof-of-work systems, proof-of-stake systems rely on a 

miners' time-valued ledger investment in the cryptocurrency as the key differentiator in picking 

the lottery-winner, not a miner's investment in high cost computing capacity and electricity 

expenditures. 

Mr. Van Valkenburgh then gave an overview of how proof-of-work systems-used by 

Bitcoin, Litecoin and a number of other cryptocurrencies-function. The first person (miner) to 

solve the hash function ( essentially a very difficult, math problem requiring expensive 

computing capability and electricity inputs) is the recognized authority for writing the next 

block, and checking the validity of each signature, i.e., private key data, for the transactions in 

the block; everyone else on the network can see and check the miner's work. The miner's effort 

is rewarded by the right to form a new block in which it allots itself an amount of the 

cryptocurrency (as prescribed in the rules of protocol), and this is a money creation transaction 

visible in the block so others in the network can verify that the correct amount is allotted. 

Mr. Van Valkenburgh noted the pros and cons as Bitcoin mining has evolved away from 

Satoshi Nakamoto' s original vision of a very democratic and open system [ of] people running 

normal looking desktop computers around the world all participating somewhat, equally to one 

dominated by a handful of people via expensive dedicated application-specific integrated circuit 

(ASIC) mining farms, basically a big server warehouse. On the pro side, it operates as a security 

feature against 51 percent attacks (i.e., attacks by someone who has obtained a majority of the 

network hashing power) against large networks like Bitcoin or Ethereum because the cost 

( capital investment in specialized computing power as well as electricity) to mount the attack 

would be tremendous. On the other hand, 51 percent attacks are a real threat to poorly 

capitalized or small cryptocurrencies that share a mining algorithm with a larger cryptocurrency 

because middling-sized miners of the large cryptocurrency (e.g., Ethereum) might pass the 51 

percent threshold if they switched their hardware to mine the smaller cryptocurrency (e.g., 

· Ethereum Classic). 

Mr. Van Valkenburgh then discussed proof-of-stake systems, explaining that instead of 

earning a winning lottery ticket through your computer's calculations and sacrifice of electricity, 

you must sacrifice the currency's accessibility (time value), the more currency previously staked 

in the block and held there without being accessed, the more power. A winner is picked 

randomly each block cycle, every 10 to 15 seconds in Ethereum, and the odds are greater the 

more someone has at stake in the system. Mr. Van Valkenburgh described two potential 

problems with proof-of-stake systems: (1) the nothing-at-stake problem, i.e., the ability of 

miners to manipulate the system to make it appear that they have coins staked to the power on 

the network when they no longer do and for which checkpointing may be a counter; and (2) forks 

that occur when some subset of a community fundamentally disagree with the rest of the 

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community and change their consensus mechanism rules so they are no longer compatible with 

the network's original protocol. 

Mr. Van Valkenburgh closed with an examination of implications for traders and funds, 

including these thoughts: (1) the proof-of-stake/proof-of-work question is generally not relevant 

since there are alternative ways to build a provably fair lottery for block creation; (2) there may 

be some impact on best practices, e.g., checkpointing, documented procedures; and (3) 

institutional participants should be wary of poorly capitalized cryptocurrencies given their 

susceptibility to a 51 percent attack, and have well-documented procedures to govern in the 

event of forks. 

Chairman Gorelick gave the floor to Ms. Trkla, and Mr. Mills, to discuss the recently 

released American Bar Association (ABA) white paper. Ms. Trkla, as chair of the ABA 

Innovative Digitized Products and Processes Subcommittee (IDPPS), spoke first. She explained 

that the ID PPS was established after CFTC former Chairman Giancarlo urged the ABA 

Derivatives and Futures Law Committee to be more active on the issue of Bitcoin and virtual 

currencies. Ms. Trkla then described the IDPPS's structure, mission statement, and three 

working groups, including the Jurisdiction Working Group (JWG), co-chaired by Mr. Mills. She 

also provided background about the JWG's recently issued white paper on state and federal laws 

applicable to cryptocurrencies and other digital assets. 

Mr. Mills then described the white paper's specific subjects: (1) Background on Digital 

Assets and Blockchain Technology; (2) Commodity Exchange Act and CFTC Regulation; (3) 

Federal Securities Regulation, Securities Act and Exchange Act; ( 4) Federal Securities 

Regulation, Investment Company Act and Investment Advisers Act; ( 5) The Need for a Better 

CFTC and the U.S. Securities and Exchange Commission (SEC) Regulatory Scheme for Digital 

Assets; (6) Financial Crimes Enforcement Network (FinCEN) Regulation; (7) International 

Regulation; (8) State Law Considerations; and, (9) an appended 50-State Virtual Currency 

Regulation Survey. Ms. Trkla discussed CFTC and SEC regulatory overlap (and gaps) in more 

detail, including issues and uncertainties arising when digital assets incorporate a security 

component such as an initial coin offering; noted that the white paper's one advocacy point was 

to urge the agencies to attempt to sort out these issues; and highlighted tools, other than 

legislation, perhaps available to the agencies to do so. 

Chairman Gorelick opened the floor to questions from the Committee members to the 

subcommittee and panel presenters. A number of questions were asked and discussed, which 

included the following topics: (1) Office of the Comptroller of the Currency (OCC) regulation 

of money transmitters; (2) regulation of tainted digital assets in a blockchain; (3) the JWG's 

consideration of rule of law/recourse implications with respect to underlying digital-asset cash 

instruments; (4) proof-of-stake/nothing-at-stake and checkpointing; (5) 51 percent attacks; and 

(6) tokenization evolution. 

[Lunch Break] 

IV. Panel III: Cybersecurity Subcommittee Presentation 

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Following the lunch break, Chairman Gorelick introduced the Cybersecurity 

Subcommittee, Mr. Price, Ms. Neer, Mr. Vega, and Mr. Harrell, as well as Mr. Magri from the 

Bank Policy Institute. He then gave the floor to Mr. Price, who introduced Mr. Magri as having 

led industry efforts to develop the Financial Sector Coordinating Council (FSSCC) 

Cybersecurity Profile (Profile). 

Mr. Magri explained that his remarks and requests were based on over two years of work 

encompassing a multitude of working sessions and input from cyber experts, financial 

institutions, an open National Institute of Standards and Technology (NIST) workshop, federal 

regulators, self-regulatory organizations (SROs), and state-based organizations to improve 

cybersecurity and address challenges. 

A particular challenge for discerning sector risk, according to Mr. Magri, is reducing the 

percentage of time chief information security officers and their teams must devote to compliance 

daily, at least 40 percent according to 2016 survey results, given that the industry faces a global 

shortage of three million cybersecurity professionals in 2019. He stated that his group identified 

and mapped the intricate array of government, industry, and SRO agencies and bodies currently 

regulating the space ( depicted in a Power Point slide), highlighting significant overlap in the 

process. Using the NIST cybersecurity framework for organizational structure and Committee 

on Payments and Market Infrastructures (CPMI) IOSCO's guidance on cyber resilience for 

financial market infrastructure, his group worked with the regulatory bodies to straighten out the 

lines of what looked like a wiring closet into a much more succinct architecture. The group then 

built off of this streamline architecture to create a Profile that add governance and dependency 

management (reflecting its increasing global appeal) as higher level functions as well as 

extending it to be more diagnostic in nature. 

Mr. Magri's presentation then listed countries involved or interested in employing a 

NIST framework; detailed benefits of the Profile approach to financial institutions, the 

supervisor community, and the ecosystem; mapped the process and main participants in 

developing the Profile; explained the public/private collaboration to achieve sector-wide scaling 

by impact; noted that 40 firms have committed to, or are actively exploring, implementing the 

Profile for the next 2019-2020 exam cycle; and quoted agency statements of support for the 

Profile. Before concluding with a slide identifying websites where the Profile could be accessed, 

Mr. Magri requested: (1) public statements of support (similar to those quoted) stating that the 

use of the Profile as input for examinations is acceptable; and (2) support for the Profile as a 

common baseline framework for cyber supervision in conversations with the Financial and 

Banking Information Infrastructure Committee (FBIIC) and with international regulators. 

Ms. Neer presented several slides to discuss cybersecurity oversight as firms move their 

infrastructure to cloud-based environments. Her presentation noted the intent to work closely 

with the CFTC to address unique challenges that will need to be accounted for in a sharedresponsibility manner as infrastructure moves to the cloud. She acknowledged that the same 

cybersecurity requirements, strong governance, education, board and risk committee 

engagement, will apply whether infrastructure management is on premises or in the cloud. Ms. 

Neer also provided a visual reference showing the sliding scale of customer/cloud-provider 

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responsibility depending on the type of cloud-based infrastructure a firm may adopt, including 

infrastructure as a service, the presentation's focus. 

Ms. Neer gave the floor to Mr. Vega to address fundamental precepts for a firm moving 

to the cloud. The following were identified and discussed: (1) the preparatory need for a 

thoughtful, deliberate execution approach; (2) the preparatory need for a strong infrastructure 

prior to migration that minimally includes data protection and encryption, service and application 

segmentation, intrusion detection system/intrusion prevention system (IDS/IPS) capabilities, 

security information and event management, and vulnerability management strategy; (3) the 

preparatory need for deployment strategies, including consideration of containerization, 

application and service re-architecture, and full automation of deployment and environmental 

builds; (4) the preparatory need for proper authentication and authorization controls; (5) the 

governance oversight requirement to understand and verify a cloud vendor's controls; (6) the 

governance oversight requirement to have an understanding of a cloud vendor's physical 

infrastructure and account for operational resilience; (7) the governance oversight requirement to 

monitor data access; (8) provider independence/open-source technology vendor management 

considerations; and (9) third-party risk management (TPRM) vulnerability scanning, and the 

need to differentiate firm versus cloud provider responsibilities. 

Next, Mr. Harrell presented on vendor management, a topic that he noted has received 

significant attention from global supervisors and standard setting bodies in the form of 

supervisory rules, rule interpretations, guidance, and questionnaires; and that firms have 

addressed by incorporating information security requirements and/or risk limitations into vendor 

contracts. Over 15 supervisory documents from various U.S. and international authorities (links 

to which were provided in a slide) currently address vendor management. Mr. Harrell said that 

the subcommittee was continuing to review supervisory documents to understand the current 

regulatory landscape before making recommendations to the TAC, and gave an overview of the 

subcommittee's progress in that effort. Given the scope of the review task (including 

supervisory guidance going back to 2003), he requested additional time for the review and 

requested TAC input on two areas: (1) preference for whether the subcommittee's 

recommendations be prescriptive or principle-based since current guidance provides both, and 

(2) whether the TAC is open to a new approach for identifying critical vendors. 

Chairman Gorelick encouraged TAC members to provide feedback on both the 

subcommittee's cloud-presentation as a prelude to having it formally propose recommendations 

at a future TAC meeting and Mr. Harrell's requests for direction. Chairman Gorelick then 

opened the floor for questions and discussion. With two exceptions, Mr. Chippas' support for a 

principles-based approach to vendor management and Mr. Magri's clarification (in response to a 

question from Mr. Kapani) that the cloud was one of a larger suite of cybersecurity components 

integrated within the Profile, the questions, comments and discussion among the members 

concerned the cloud presentation. 

Mr. Greenspun questioned whether the subcommittee thought about recommending 

additional considerations for an exchange versus a broker/dealer. Mr. Vega said the 

subcommittee would consider the issue and come back to the TAC on it. Mr. Chippas asked 

whether the subcommittee thought about making differentiated recommendations reflecting 

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different organizational types and sizes. Mr. Vega said the subcommittee could work on 

clarifications so that the recommendations addressed smaller, as well as larger, firms. Mr. Chou 

supported elucidation of the cloud's scale advantages, i.e., to see more vulnerabilities in a 

different set of contexts. Mr. Workie shared insights from FINRA's experience moving 

infrastructure to the cloud. Mr. Levy suggested that, for purposes of cloud deployment, 

distinctions be made between applications, data, and calculations that traditionally have been 

treated together as a system. Mr. Chattaway asked whether there is sufficient competition in the 

space, thus generating discussion on the question. And, Mr. Stein asked whether the 

subcommittee had considered some form of cloud service certification that would allow less 

sophisticated clients to rely on a vendor's certification. Ms. Neer and Mr. Vega indicated 

certification is an issue the subcommittee would consider. 

Chairman Gorelick asked whether the subcommittee believes the current regulatory 

oversight requirements are insufficient for the risks and benefits of the cloud infrastructure. Mr. 

Vega responded in the negative. Ms. Neer answered that a principles-based approach is a good 

approach relative to a prescriptive approach. Mr. Magri requested that any type of guidance or 

regulation follow the architecture of the cybersecurity Profile. 

When the round of questions was over, Chairman Gorelick introduced the members of 

the DLT and Market Infrastructure Subcommittee who would be presenting the final panel on the 

agenda, Ms. Hoffman-Childress, Mr. Cooper, and Mr. Drennan, as well as the guest speaker, Ms. 

Kruse from ISDA. Chairman Gorelick then announced a short break. 

[Break] 

V. Panel IV: DLT and Market Infrastructure Subcommittee Presentation & Special 

Presentation from ISDA 

Following the break, Ms. Hoffman-Childress outlined the subcommittee's presentation. 

First, Ms. Hoffman-Childress would address the current state of blockchain. Second, Mr. 

Cooper would address DLT forward-looking technology. And third, Mr. Drennan would address 

real-world applications and next steps. 

Ms. Hoffman-Childress' presentation made a number of observations about the current 

state ofDLT technology (commonly known as blockchain), as well as reviewed its history. Her 

observations included the following: (1) by giving direct control back to the end-user, 

blockchain has the power to disrupt any industry that employs trusted third-party middlemen; (2) 

paradigm-shifting technological revolution involves a process of trial and error and blockchain is 

entering the trough of disillusionment cycle ( down from the peak of inflated expectations) of the 

Hype Cycle for Emerging Technology (as shown on slide), meaning there will be marketplace 

ups and downs moving forward; (3) blockchain adoption is underway at varying degrees 

(ranging from awareness, experimenting, production, to not aware) across a multitude of industry 

segments (as shown on a slide); and (4) blockchain has tremendous promise within these 

representative industries. 

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Ms. Hoffman-Childress presented blockchain's history with a timeline slide depicting: 

(1) its conceptual origins in the 1990s through Satoshi Nakamoto's white paper in 2009 

envisioning Bitcoin built on the blockchain concept; (2) its evolution to transaction use (i.e., 

deployment of cryptocurrency in application related to cash and, later, current transfer in digital 

payment systems) in 2011-2013; (3) its evolution to contract use (i.e., financial 

markets/applications use beyond cash transactions and, later, smart contracts) in 2013-2015; and 

(4) its evolution to application use (i.e., permission blockchain network solutions and, later, 

large-sized market consolidation) in 2015-2017. 

Mr. Cooper prefaced his remarks, noting that predictive comments should be taking with 

a grain of salt, a point reinforced by the irony that ten years after Satoshi Nakamoto' s white 

paper, a manifesto against many of the institutions represented in the room, financial institutions, 

global companies, and federal governments were using and/or contemplating blockchain. He 

identified two rules of thumb for 2019: (1) this is already real, with R3, IBM, HSBC and others 

involved today in live-transaction volume occurring in different markets on the blockchain; (2) 

look to the things that are the most antiquated, broken, and reliant on legacy systems and 

processes in looking where blockchain technology is likely to be deployed next. He cited 

HQLAx, Tradewind, Finastra, and B3i as examples of what is happening in markets on R3's 

platform currently. Looking forward, Mr. Cooper expected the nascent deployment that is 

occurring now to reach scale in 2020-21; that large financial institutions, which are currently 

deploying blockchain solutions to handle transactions among their divisions, will continue to do 

so; and, looking more futuristically, that blockchain will converge with the other types of 

massively important and influential technologies out there, like AI machine learning and big 

data. 

Mr. Drennan's presentation initially focused on three areas of real-world blockchain 

application. The three applications were as follows: smart contracting, trade reporting, and 

payment and delivery-vs-payment (DVP). To illustrate smart contract use (i.e., algorithmic, selfexecuting processes that can enable various types of value transfer between parties), Mr. 

Drennan described the example of DL T-based transaction data verification for credit-default 

swap exposure: the contract goes out, performs mark-to-market, calculates margin, and requests 

the margin exchange between protection buyer and seller. With respect to trade reporting, a slide 

explained that DLT systems help verify trades according to an agreed-upon set of 

domestic/international standards, creating an up-to-date ledger of trades for regulators and 

market participants. Mr. Drennan envisioned a move to "centralized contracts" as a way for 

firms to adopt trade reporting standards that have proven elusive for international standardsetters and upon which regulators could piggyback. Regarding payments, Mr. Drennan briefly 

described a number of digital payment initiatives: Ubin & Jasper, Universal Settlement Coin, 

JPM Coin, HSBC Everywhere, IBM Blockchain Worldwide, and IHS Markit Stax Payments. 

He noted that digital forms of payment could be extended to futures contracts DVP. 

Mr. Drennan presented a slide listing next steps and recommendations, and solicited the 

TAC's advice with respect to those listed. These next steps/recommendations were as follows: 

(1) determine which aspects of derivative trading can benefit from DL T; (2) public and/or private 

pilots or small-scale testing of new technologies to transform markets; (3) industry coordination 

to facilitate understand of switching benefits, costs and barriers; ( 4) consideration of migration 

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and adoption patterns; (5) CFTC guidance on the application of current regulation to DLT (e.g., 

can it support trade reporting regimes) and positive words on DLT adoption; (6) international 

coordination among regulators to create common standards for cross-border DLT uses (e.g., in 

swaps); and (7) establish criteria for evaluating the impact of smart contract technologies on 

institutions' safety and soundness and systemic risk (e.g., potential for reducing capital ratios by 

enhancing certainty of fund movement and product valuation). 

Ms. Kruse gave a presentation on ISDA's Common Domain Model (CDM), a project 

intended to fill the need for a common blueprint for representing underlying transactions that tie 

back to the ISDA legal terminology that underpins those trades. She described CDM as a 

machine-readable and machine executable model for derivatives products, processes, and 

calculations. It is a code that can be downloaded in different languages and implemented 

directly, which could be thought of as the Google Translate for derivatives. Ms. Kruse stated 

that CDM uses a composable approach, i.e., both the product and event model provide 

components from which more complex things are built, it features payouts, which are used to 

create objects when put together make products. CDM 2.0, the full version for interest rate and 

credit derivatives, is now open to all market participants under a free-use, open license. Ms. 

Kruse discussed the following CDM benefits: (1) it can enhance interoperability and straight 

through processing; (2) it can give regulators better oversight by promoting transparency and 

alignment between regulators and market participants; and (3) it can create an environment for 

innovation in financial markets. Before closing, Ms. Kruse previewed the next steps for CDM. 

She described a full model for data and processes within the collateral agreements, which can 

integrate CDM into ISDA Create and other collateral services, product scope expansions, further 

integration with technology providers working on financial market solutions, and 

implementation ofreporting rules to demonstrate CDM's power to improve data quality and 

remove interpretation risk in regulatory implementations. 

Chairman Gorelick opened the floor to questions and discussion, which included the 

following: (1) how the financial services industry could improve its rate of adoption of DL T 

technology; (2) how the Bernie Madofffraud case would have played out differently in a DLT 

world; (3) the concern for potential new regulatory views on the outputs of smart contracts; ( 4) 

whether CDM can work across platforms other than DLT and open-source licensing issues; (5) 

DTCC's involvement with CDM; (6) how will the ISDA Master Agreement work operationally 

for contracting parties if some aspects of an arrangement are subject to a smart contract and some 

are not; and (7) how dispute resolution would occur with CDM. 

VI. Closing Remarks 

In closing, Chairman Gorelick, Mr. Gill, and each Commissioner thanked the panelists 

and TAC members for their participation and contribution to a very informative day. 

Commissioner Quintenz additionally characterized the information and thoughts elicited during 

the session as "remarkable" and affirmed the value of advisory committees to the Commission, 

before noting that much more work remains. 

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Mr. Gorfine adjourned the meeting at 3:13 p.m. 

I hereby certify that the foregoing minutes are accurate. 

Richard Gorelick 

Chair, Technology Advisory Committee 

Ddte i 

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