The pace at which technology is evolving, especially artificial intelligence, the days are not far when they will be able to make a tangible impact on the countries’ economies. AI over the years has conquered almost every vertical and now in recent years, it has made headway in the trading industry also. In fact, AI is already playing a vital role and is changing the industry significantly.

Given all the benefits of leveraging AI in trading, financial giants across the world are switching to AI-driven systems which can not only foresee the market trends but also help to make the trade better. This might be a ‘yay’ moment for AI but for traders, this is turning out to be a nightmare. Many Wall Street traders believe that if this transformation takes more critical turns then the days are not so far when high-earning traders will be sacked.

But what if AI would have been able to predict or stop the 2008 crash at the Bombay Stock Exchange? In January 2008, the BSE fell by 1,408 points to 17,605 leading to one of the largest erosions in investor wealth in the history of India. In fact, the day, which is now referred to as “Black Monday”, also took place because the BSE stopped trading for a while on 21 January 2008 due to a technical snag.

AI On Trading Platforms

National Stock Exchange: In August 2018, the NSE had announced that they were working on AI to strengthen their surveillance operations to prevent any manipulative activities amid reported cases of social media leaks of sensitive information.

Why Businesses Are Opting For AI In Trading

Trading on the stock market is all about making a profit — there is no room for any kind of emotions. Most of the wrong decisions in trading or stock market are taken because of human emotions, as demonstrated by scores of business management tomes and Hollywood flicks. However, a machine can make complicated decisions and execute trades at a rate which humans cannot match.

Some of the major factors that play a key role in trading decision making are:

• Price variations
• Macroeconomic data volume changes
• Prophesising based on news

All these parameters can be used effectively by an AI-powered machine or a program.

Stock Prediction: Discovering trends in the stock market is done using a company’s previous data and by applying AI and machine learning. Trading firms can crunch historical data more quickly and analyse how they have behaved in the past and create predictive models regarding the rise and fall of the markets. AI makes the decision of buying and selling of stocks easy and based on the inflexion points in the predictive models, AI suggests whether to buy or sell stocks.

Future Vision

Financial firms across the world are already in a race to develop and implement AI-based program to make trading more profitable and efficient. As new tools continue to enter the trading industry, more and more data will be able to be manipulated; not only from historical data but also from other sources like social media.

With all these advancements, the involvement of AI in trading will skyrocket and financial giants from the wall street will need to invest more in the technology part. If the industry is evolving, one also need to evolve to stay on the same level. So, in order to benefit both the firm and its clients, AI might take the place of traditional traders — the industry can expect a significant transformation in terms of employment.

The Snag

Earlier this month, the Securities and Exchange Board of India (SEBI) had issued a directive that stockbrokers and depository participants who use AI and ML-based applications would have to make quarterly disclosures on their compliance with cybersecurity framework. This instruction came after the SEBI observed that AI/ML systems were black boxes and that it was difficult to see if these systems it adhered to the regulator’s cybersecurity framework or not.

Role Of Traders On Wall Street

Humans can still work in trading future; AI might help trading firms with analytics, forecasting, data search or trading, but humans are still the ones who can narrow analyses and share with firms, clients and the public. So, basically AI cannot completely replace humans; they will always be involved when it comes to communication.