Comment Letters

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June 01, 2021

The Honorable Kevin Thomas, Chair
Senate Committee on Consumer Protection
Legislative Office Bldg, Room 947
Albany, NY 12247

Re: New York State Senate Bill S. 6701, "The New York Privacy Act"

Dear Chair Thomas and Members of the Senate Committee on Consumer Protection:

National Futures Association (NFA) appreciates the opportunity to comment on the New York State Senate bill S.6701, "The New York Privacy Act" (the Privacy Act), which would provide data privacy protections for New York residents and place certain privacy-related obligations on a number of entities. NFA generally supports increased privacy protections, but for the reasons discussed below, seeks an exemption from the Privacy Act.

NFA is a not-for-profit, registered futures association (RFA) under the Commodity Exchange Act.1 NFA is also the industrywide self-regulatory organization (SRO) for the derivatives industry, including exchange-traded futures, OTC derivatives (or swaps) and retail off-exchange foreign currency (or forex). NFA's membership includes swap dealers, futures commission merchants, commodity pool operators, commodity trading advisors, introducing brokers, retail foreign exchange dealers and the registered associated persons of these entities. NFA's Membership currently numbers approximately 3,200 Member firms and 45,000 associated persons, many of which do business in New York. Every aspect of NFA's regulatory authority is overseen and monitored by the Commodity Futures Trading Commission (CFTC), the Congressionally authorized federal derivatives regulator. NFA's responsibilities include registering all firms and industry professionals on behalf of the CFTC,2 passing rules to ensure fair dealing with customers, examining and investigating Members for compliance with those rules, taking enforcement actions against those Members that violate NFA Rules, administering proficiency examinations for individuals engaged in derivatives activities and providing a low cost arbitration forum for members of the investing public to resolve their disputes with NFA Members. In order for NFA to successfully carry out these functions, NFA collects data and other information and relies on increasingly sophisticated technological tools such as machine learning and artificial intelligence to adequately fulfill its regulatory responsibilities over the derivatives industry.

NFA is concerned that some data and information NFA collects to carry out its responsibilities may be unintentionally captured by the Privacy Act's restrictions on the collection and use of data, even though our state and federal regulatory partners receive clear exemptions from these same restrictions. Also, NFA does not use any of its data for a commercial purpose, but the exemptions in the Privacy Act only extend to not-for-profits that are 501(c)(3) entities.

NFA uses the data it collects only for regulatory purposes, and NFA is required to maintain and safeguard the regulatory data it collects on behalf of the CFTC in a manner consistent with standards established and overseen by the CFTC. The proposed restrictions in the Privacy Act could, however, significantly interfere with NFA's ability to fulfill its role in safeguarding the integrity of the derivatives markets, protect investors and ensure its Members meet their regulatory responsibilities. The Privacy Act would place restrictions on the collection and use of data, for example the requirement to delete data in certain circumstances, that may be counter to requirements imposed on NFA by the CFTC. Such restrictions could unintentionally interfere with NFA fulfilling its regulatory purpose.

For these reasons, we respectfully request that the language below be included in Section 2(a) of the bill. Such language would ensure that NFA could continue to fulfill its role and responsibilities.

"[This Act] shall not apply to a registered futures association so designated pursuant to Section 17 of the Commodity Exchange Act (7 U.S.C. 21), as amended, or any regulations adopted thereunder."

If you have any questions or there is any further information we may be able to provide, please do not hesitate to contact me at cwooding@nfa.futures.org.

Very truly yours,

Carol A. Wooding
Senior Vice President,
General Counsel and Secretary


1 See 7 U.S.C. 21; 17 C.F.R. 170.1 et seq.

2 17 CFR 3.2(a) (stating that the registration functions of the CFTC shall be performed by NFA).

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