Regulated Exchanges and AI: What’s Behind the Hype

April 16, 2024


The topic of AI has been the subject of a number of panels at recent industry events attended by Exberry. We thought it would be helpful to provide a snapshot of some of the leading thinking on AI, particularly how it is predicted to affect regulated exchanges.

The potential revolutionary impact of AI is the number one consideration. Actionable intelligence from massive datasets can finally be unlocked. Productivity through the automation of manual workflows can be improved, providing more effective risk management and combating cybercrime. 

While the opportunities are huge, we also have to recognise that AI is simply a technological tool which can be used for both good and bad. We need to be careful, for example, that this technology won’t hamper the smooth functioning and integrity of markets. Sophisticated GenAI deep fakes pose a serious concern, and regulators need to step up and start introducing rules that put safeguards around this. We also need to remember that while some of the most popular GenAIs are open-sourced and currently provided for free, this might not always be the case. Similar to other large technology providers, exchanges should be aware of vendor lock-in. 

In the meantime, a handful of the larger exchanges have been in pursuit of AI use cases for the past few years. Financial crime capabilities are a common one, whereas others are looking into introducing innovations such as settlement prediction or maximising fill rates of orders at a particular time. 

Notwithstanding the issues around cybercrime and potential system market risk, there is a general feeling that GenAI will fundamentally alter methods of trading. It might still be in the very early stages, but it could stand to have a lasting impact in the industry. 

“Nobody gets fired for buying IBM”

The phrase “Nobody gets fired for buying IBM” has been a steadfast mantra in the tech industry, underscoring the inclination to choose established, reliable vendors to sidestep blame when issues arise. Twenty years ago, everyone knew that choosing reputable brands, such as IBM, was the way to go.

The Gulf Exchanges, They Are a-Changin’

A couple of weeks ago I had the chance to visit the Gulf region. In particular, I attended both the Arab Federation of Capital Markets (AFCM) Annual Conference in Qatar, as well as The Capital Market Summit in Dubai.

Next-Gen Consultancy for Financial Markets

Ambitious financial exchanges need to keep growing. Yet in the world of capital markets this is not always a straightforward task. Each jurisdiction has its own national characteristics and different way of doing things. If an exchange decides to build its own trading or clearing infrastructure, unless it is happy paying an exorbitant cost, it will typically have to wait a number of years for delivery. So, what are the alternatives for exchanges?

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