6th Annual Conference. June 04, 2014. San Francisco

Which federal agency is regulating and will have the greatest impact on the cloud? Hint: There is a right answer.

Session Details

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Session Abstract

It’s not the FCC, FTC, SEC, or any other major federal agency, but a lesser-known agency called the Commodity Futures Trading Commission, or the CFTC. If you are thinking they just regulate corn, you are in deep trouble because it means you have not yet complied with their required registration of certain cloud computing companies.
If you have not followed the CFTC, or taken steps to register as a hosting or cloud computing service provider, you may be facing severe penalties, huge breaches in current service contracts, and deep impacts to your profit margins.
The cloud computing and hosting industry has successfully avoided large-scale infrastructure regulation for the past ten years. However, over the past two years, there has been a federal government ramp up of regulations that severely limit the industry’s ability to contract, to manipulate and make actionable data, and to otherwise grow. There are five current regulations at varying stages of formation (either already applicable law, currently being drafted, or somewhere in between).
First, the CFTC has proposed regulation that limits the hosting and service providers ability to freely contract. This includes requiring all cloud computing and hosting companies to charge ONE price to every customer, regardless of current contracts or negotiations. Part of this same regulation requires that the service providers, including data centers, must make room for (even if that means building a brand new data center if the old one is at capacity) and provide services to any “willing and able” potential customer, regardless of credit worthiness or liquidity. As long as just one financial service or market participant is in the same data center (including oil, gas, or energy companies), this regulation will apply to that facility and every service provider in it.
Second, the same agency is currently forming the new swaps and over-the-counter derivatives market, which is a $600 Trillion market. One finalized regulation requires that any market participant must provide the CFTC with its vendor’s or its own data analytics plan before participating in the market.
So, if any of your clients are banks, financial advisers, hedge funds, market traders, exchanges, oil, gas, or energy companies or are at all trading on a commodity or equity market, then both you and your client are equally responsible for providing the CFTC and other agencies with your data analytics, algorithm, or business intelligence products. Your client will be stopped from trading unless this demonstration happens first. That is the current law. If you already knew the law, then terrific. You need to communicate with the CFTC to show them how your data tool is not going to cause a flash crash. If you have not provided information to the CFTC, then the data product you created is now useless because your client is legally prohibited from using it for its intended purpose.
Third, there are many steps to take to prevent a flood of litigation by banks of cloud computing companies. The first is to organize. The second is to establish creditability with the CFTC, your “would be” regulator. And the third is to make products for the CFTC, thereby making your regulator your client.

Speaker

Peter Kavounas, CEO and President, Cloud Strategix, LLC
Mr. Kavounas, is founder, CEO, and President of Cloud Strategix, LLC, based in Washington, DC. Mr. Kavounas has over a decade of experience in telecommunications, cloud computing, and data hosting. Mr. Kavounas works with data storage and analytics, business intelligence, hosting, and financial companies to preserve the interests of his clients facing regulation from multiple federal and state agencies, as well as Congress. Additionally, Mr. Kavounas consults on and designs business strategies for small to large companies trying to win the cloud computing business of federal agencies. Mr. Kavounas founded Cloud Strategix, LLC on the premise that cloud computing and hosting companies were being regulated without even knowing it, and that regulators were entering the cloud computing world like bulls in china shops. The goal of his company is to put the cloud computing and hosting industry in touch with its regulator before the regulator kills the industry due to a lack of understanding and communication. Mr. Kavounas began his career 12 years ago working for telecommunications companies in their Finance and Sales departments, where he focused on enterprise hosting products and services. He practiced law for a top 25 law firm in the areas of IP and Securities litigation and regulation. Mr. Kavounas began his public service by acting as Counsel to the Financial Crisis Inquiry Commission (FCIC), created by President Obama. In his capacity as Counsel, he worked on several issues, including investigating large banks, portfolio managers, and counter-parties to credit default swaps for asset-backed securities collateralized debt obligations. With his experience analyzing 140 high-grade and mezzanine CDOs and swaps deals done during the crisis, Mr. Kavounas was asked to assist the Commodity Futures Trading Commission (CFTC) in its creation of a transparent swaps market. Part of his responsibilities included researching, analyzing, and reporting on the newly enacted provisions of The Dodd-Frank Wall Street Reform and Consumer Protection Act. Mr. Kavounas dealt with the establishment of swaps data repositories (SDRs) and swaps execution facilities (SEFs), as well as the enactment of proposed regulation of data centers and third-party hosting service providers. Mr. Kavounas has authored several articles focusing on legal trends in securities and technology litigation and deal structures, as well as mortgage standards in compliance with Dodd-Frank. He co-authored four chapters of the Official Financial Crisis Inquiry Report. Mr. Kavounas has been invited to speak at several events. He spoke to the Washington College of Law’s Business Law Review about the FCIC and the future of government in cloud computing. He was a panelist at Tier 1 Research’s 2011 Hosting & Cloud Transformation Summit, where he discussed regulatory challenges facing the industry. Mr. Kavounas earned a double major in Communications and Managerial Economics at the University of California, Davis. He earned his Juris Doctor from Indiana University School of Law. Mr. Kavounas completed his LL.M. in Securities Law and Policy at the American University's Washington College of Law. He is barred in the District of Columbia, where he resides with his wife and two children.

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