What Will AI Do To Financial Markets?

In-depth analysis of risk and promise, based on a survey of industry executives and interviews with legal, industry and academic experts. The study, called “Ghosts in the Machine: Artificial intelligence, risks and regulation in financial markets,” was commissioned by Baker & McKenzie and carried out by Euromoney Institutional Investor Thought Leadership. Surveying 424 senior executives from financial institutions world-wide and conducting in-depth interviews with eleven senior executives and independent experts, and it came up with something of a double message. “AI promises not reckless speed or loss of control, but rather an unprecedented depth and breadth of insight, and the ability to act on information and learn from its actions. However, many experts acknowledge a degree of risk surrounding the use of AI, stemming partly from uncertainty—it is, after all, still at experimental stages in many applications including trading, portfolio management, and credit assessment. As a result, the risk of malfunctioning algorithms and concerns surrounding the security, privacy, and quality of data has led to calls for regulation.” One certainty is that a lot of people expect to either lose their job or be forced to re-imagine it: Sixty-eight percent of respondents expect to see “complete or substantial change to their own jobs,” although as one of the expert commentators notes, talented professionals are going to be needed in the foreseeable future to, among other things, set up and validate the algorithms. The report concludes with a nod to entrepreneurs Peter Thiel and Elon Musk and the organization they formed last year, called OpenAI. A statement from the group said that it’s hard to fathom “how much human-level AI could benefit society, and it’s equally hard to imagine how much it could damage society if built or used incorrectly.”