An irreverent Wall Street Blog
FINRA's Innovation Outreach Initiative and Fifth Harmony Taxonomy As Utilized in Fintech AI
July 31, 2018
The Financial Industry Regulatory Authority has issued yet another "Notice" -- this time not merely a regular, normal, run-of-the-mill notice but, OMG!!!, a "Special Notice." Lemme stop here so that I can catch my breath because I am breathless, breathless with anticipation, I say. Just off the press, we have: FINRA Requests Comment on Financial Technology Innovation in the Broker-Dealer Industry
(FINRA Special Notice July 30, 2018 / Comment Period Expires: October 12, 2018)
http://www.finra.org/sites/default/files/Special-Notice-073018.pdf
http://www.finra.org/sites/default/files/Special-Notice-073018.pdf
As set forth in the "Summary" of the Special Notice [Ed: footnotes omitted]:
New financial technology innovations, commonly known as "fintech," can offer benefits for investors and the financial services industry, but can also present investor protection concerns where the safeguards of the securities laws are not respected. FINRA's discussions with representatives of the fintech industry and our member firms through our Innovation Outreach Initiative have enabled us to better understand market participants' interest in efforts among regulators to create an environment supportive of fintech innovations that benefit investors and the capital markets. Moreover, we have received several requests to solicit feedback from the broader public regarding how FINRA may support fintech innovation consistent with our mission of investor protection and market integrity. In response to these requests, we are seeking comments on how FINRA can support fintech development consistent with this mission. In addition, we request specific comment on certain fintech areas, including the provision of data aggregation services, supervisory processes concerning the use of artificial intelligence, and the development of a taxonomy-based machine-readable rulebook
Fintech Innovations
We got fintech innovations! We got FINRA's "Innovation Outreach Initiative"!
I'm pretty wired into the FINRA member firm community. I've been in the biz since 1982 and write an industry blog and news feed -- so, hey, I have my ear to the ground. Not that FINRA would ever overstate anything or engage in any puffery but the self-regulatory-organization asserts in the Special Notice that it is trying to
better understand market participants' interest in efforts among regulators to create an environment supportive of fintech innovations that benefit investors and the capital markets.
So . . . lemme see if I got this.
Market participants (what a lovely amorphous term that is) purportedly have expressed an "interest" with regulators' efforts to create a supportive environment for fintech innovations?
Really?
There's an active, burning, uncontrollable demand out on the Street for Wall Street regulators to become more supportive of fintech innovations? And not just those innovations that benefit the capital markets but, omigod, for fintech innovations that will benefit investors! Now that's amazing. I'm trying to think of the last time the securities industry was up in arms about enrolling the regulatory community in the battle to benefit investors via fintech innovation. Maybe I missed that amid all of the FINRA community's unbridled support for the "Fiduciary Rule?" Perhaps I missed all that pro-investor sentiment when the FINRA community rallied behind the proposal for an "Antifraud Fund?" Yeah, sure, FINRA was deafened by its member firms screaming for more investor protection.
Taxonomy-Based Machine Readable Rulebook
In furtherance of FINRA's so-called Innovation Outreach Initiative (is there someone on payroll at FINRA who comes up with all these lovely titles and names?), we are told that there is an investor protection mission seeking feedback and specific comment about data aggregation services. We are alerted to the existence of a taxonomy-based machine readable rulebook. Before this circus parade of Wall Street regulation passes us all by, you should stand back from the curb, grab your kids for safety's sake, and enjoy the thrill of the fearsome data aggregation service and the magnificent taxonomy-based machine readable rulebook, which are caged to protect the investing public and surrounded by burly regulators armed with electronic whips and digital prods just in case the bars of their transport devices should fail. Don't let the kiddies get too near. Think what went wrong at Jurassic Park.
Regulatory Cotton Candy
Given my obvious cynicism, it's hard for me to see FINRA's Special Notice as anything more than regulatory cotton-candy. This fluffy mass of "request for comments" rarely produces anything substantive after a protracted period of purported review of solicited comments, the drafting of proposed rules, the ensuing debate about those rules, and the painful and extended period during which the approved draft proposals flounder in the mud of regulatory approval. The result of many FINRA requests for comments is something that is often unworkable or of dubious value.
I am told that there are also those variants of FINRA request for comments where the fix is in and the powers that be go through the charade of pretending to truly seek input when, in truth, they have already decided what the new rule will look like and are hoping to engineer a self-serving campaign of confirmation -- but I'm sure that such an approach is very, very rare and only resorted to for the common weal and only in dire circumstances such as an emergency or, say, a Tuesday.
Common Taxonomy
I'm not sure whether there's any fix in place with the recent FINRA Special Notice and, honestly, I sure as hell hope there isn't, but hope isn't what it used to be and who the hell knows why FINRA chose July 30, 2018, to seek comments on the regulator's latest initiative. Not that anyone on Wall Street is on vacation in August, right? Worse, I rolled my eyes, yes, both of them, when reading this gobbledygook and double-speak in the Special Notice:
Development of Common Taxonomy
- As noted previously, certain regulators have developed, or are considering developing, a taxonomy-based machine-readable rulebook. What are the potential benefits and challenges associated with developing a consistent or harmonized taxonomy across regulators? What regulatory areas would have the greatest benefits or challenges from any such harmonization?
- Absent the development of a consistent or harmonized taxonomy across relevant regulators, would the creation of a machine-readable rulebook by FINRA be useful? Are there technology tools or processes that decrease the need for a consistent or harmonized taxonomy?
- What role should vendors and regulated firms play in the adoption, development and ongoing taxonomy maintenance?
Taxonomy?
Taxonomy??
Taxonomy???
SIDE BAR: Yeah sure: "taxonomy."Are we dissecting regulatory animals, stuffing them, and mounting them for display?Does FINRA really need to take sides in the growing debate between licensed taxis and ride-sharing services such as Uber and Lyft?Seriously -- do you know anyone -- anyone -- who uses the word "taxonomy" in polite company? More to the point, wouldn't you consider someone an insufferable bore and pompous ass if they uttered the phrase "taxonomy-based machine-readable rulebook?" If you do know of someone that uses that language, would you let him or her use the towels in your bathroom?Oh, excuse me. You say that you know what taxonomy means. Assuming you want to pretend that you know what taxonomy means, please explain to me the difference among these variations in the FINRA Special Notice: "common" taxonomy, and "harmonized" taxonomy.
In reading FINRA's over-stuffed Special Notice, I hear the persistent whir of a snow-blowing machine and instinctively place both of my hands firmly on my lower cheeks and press them together in an effort to make sure that nothing gets blown between them, as I fear FINRA is attempting to do. Nothing sets off my inner alarms quicker than a dose of bureaucratic bull-shit which can't escape its own smell. Taxonomy indeed!
Fifth Harmony Taxonomy
On a more serious note, although FINRA's Special Notice raises the prospect of harmonized taxonomy, FINRA should have included an analysis of the four stages of harmonics that are currently driving the science of Artificial Intelligence taxonomy, and particularly as applied to the field of machine-readable rulebooks. The four known harmonic stages of taxonomy aside, the BrokeAndBroker.com Blog is calling upon FINRA to amend its Special Notice to seek comments about the recently conceptualized fifth harmonic stage of taxonomy that is now being circulated in Beta version for application in AI programming. Given the likely role of Fifth Harmony Taxonomy and its application to AI implementation in machine-readable rulebooks, I am puzzled as to the omission of this entire approach and emerging field from consideration in the Special Notice.
FINRA's Special Notice asks "What role should vendors and regulated firms play in the adoption, development and ongoing taxonomy maintenance?" The emerging Fifth Harmony Taxonomy of AI coding continues to progress, and, as such, user acceptance is growing as this new field of analytics is becoming further embedded in the harmonized taxonomy community. Moreover, as fintech shifts from the analog confines of the once-traditional bricks-and-mortar workplace and increasingly becomes a mobile-adapted tech better suited for a digitized worksite environment, we are forced to contemplate the inevitable fintech adoption of Fifth Harmony Taxonomy in off-site applications. As Fifth Harmony Taxonomy makes it more feasible for industry tech staff to work from home, we will inevitably be forced to confront a variation of the Heisenberg Uncertainty Principle to the extent that the bolting-on of Fifth Harmony Taxonomy will exponentially exacerbate our ability to measure any transmitted data packet as to its given position and the momentum by which that packet is being transmitted. Fintech Fifth Harmony Taxonomy will increasingly be utilized by those who work from home-based AI systems but even resorting to Planck's Constant will not resolve data-stream disparities arising from utilization at non-office-based worksites such as remote or home-based locations.
Admittedly, there is ongoing debate about whether Fifth Harmony Taxonomy utilized via an at-home AI fintech application will produce compelling dollar-based or cryptocurrency-based savings. One recently published academic paper argues that utilization of Fifth Harmony Taxonomy for machine-readable fintech rulebooks should not require the physical presence of an operator at an office worksite because such an operator may work more effectively from home. Notwithstanding the author's advocacy for at-home work, they concede that said operator will still have to put in a certain amount of traditional work. Addressing the likely duality of the Heisenberg Uncertainty Principle, the authors of the academic paper conclude that off-site operators will, indeed, become managers at home (phrased in the more colloquial "boss") and entitled to such emoluments as promotion and vacation. See this instructional video for further guidance:
Citation to scholarly materials cited in the BrokeAndBroker.com Blog:
"Work from Home" Alexander Izquierdo / Brian Dong Ho Lee / Dallas James Koehlke / Joshua Emanuel Coleman / Jude DeMorest / Tyrone William Griffin Jr.: Songwriters of "Work from Home." Lyrics copyrighted by Sony/ATV Music Publishing LLC, Warner/Chappell Music.Performed by Fifth Harmony.
International Journal of Harmonic Taxonomy and Fintech Artificial Intelligence Applications for Machine-Readable Rulebooks / Vol. 7, No. 3 (2018)
"Work from Home" (performed by Fifth Harmony)I ain't worried 'bout nothin'I ain't wearin' na nadaI'm sittin' pretty, impatient, but I know you gottaPut in them hours, I'mma make it hotterI'm sending pic after picture, I'mma get you firedI know you're always on the night shiftBut I can't stand these nights aloneAnd I don't need no explanation'Cause baby, you're the boss at homeYou don't gotta go to work, work, work, work, work, work, workBut you gotta put in work, work, work, work, work, work, workYou don't gotta go to work, work, work, work, work, work, workLet my body do the work, work, work, work, work, work, work, workWe can work from home, oh, oh, oh ohWe can work from home, oh, oh, oh ohLet's put it into motionI'ma give you a promotionI'll make it feel like a vacay, turn the bed into an oceanWe don't need nobody, I just need your bodyNothin' but sheets in between us, ain't no getting off earlyI know you're always on the night shiftBut I can't stand these nights aloneAnd I don't need no explanation'Cause baby, you're the boss at homeYou don't gotta go to work, work, work, work, work, work, workBut you gotta put in work, work, work, work, work, work, workYou don't gotta go to work, work, work, work, work, work, workLet my body do the work, work, work, work, work, work, work, workWe can work from home, oh, oh, oh-ohWe can work from home, oh, oh, oh-ohGirl, go to work for meCan you make it clap, no hands for me?Take it to the ground, pick it up for meLook back at it all over mePut in work like my timesheetShe ride it like a '63I'ma buy her no CelineLet her ride in a foreign with meOh, she the bae, I'm her booAnd she down to break the rulesRide or die, she gon' goI'm gon' judge, she finesseI pipe up, she take thatPutting overtime on your bodyYou don't gotta go to work, work, work, work, work, work, workBut you gotta put in work, work, work, work, work, work, workYou don't gotta go to work, work, work, work, work, work, workLet my body do the work, work, work, work, work, work, work, workWe can work from home, oh, oh, oh-ohWe can work from home, oh, oh, oh-ohYeah, we can work from homeYeah, we can work from homeYeah