US CFTC taps Nasdaq surveillance system as expands crypto oversight

The U.S. Commodity Futures Trading Commission (CFTC) is adopting Nasdaq's surveillance program as it positions itself to take on a larger role in overseeing digital assets.

The derivatives regulator said Nasdaq's program will protect markets from fraud, abuse, and manipulation, in a statement on Wednesday. 

“As our markets continue to evolve and integrate new technology, it’s critical that the CFTC stays ahead of the curve,” Acting Chairman Caroline Pham said on Wednesday. 

The new surveillance system will equip the agency with automated alerts and "cross-market analytics," Pham added. 

The agency is also gearing up for growth in cryptocurrency markets, Pham said.

Earlier this month, the agency launched its "Crypto Sprint" initiative, which focuses on crypto futures trading and recommendations outlined in the President's Working Group on Digital Asset Markets. 

The CFTC’s role in crypto oversight could expand significantly if Congress passes legislation currently under consideration in both chambers. The proposed bills would give the agency broader authority over digital assets. However, the CFTC is facing staffing challenges, with four commissioners — Pham among them — departing or expected to step down once a new chair is confirmed.

In particular, the Clarity Act, which has not yet been signed into law, expands the CFTC's oversight of crypto by granting it exclusive jurisdiction over blockchain-based commodities, requiring registration of digital commodity exchanges, brokers, and dealers, and imposing new compliance, anti-money laundering, and reporting obligations.

The agency said on Wednesday Nasdaq's program will help it spot patterns of potential manipulation and allows it to "scale rapidly through periods of heightened volume and volatility."

"This includes access to comprehensive order book data to support real-time analysis and decision-making, which is a critical frontier to prevent and detect market abuse across both traditional and crypto asset markets," the CFTC said.