Forty-four percent of capital markets professionals globally say their firms are already using artificial intelligence in their trading processes, according to new data from Greenwich Associates.
With another 17% reporting plans to implement AI in trading in the next 12-24 months, it’s clear that a solid majority of market participants—including buy-side institutions, sell-side firms, exchanges, and others—soon will be using AI in the securities trading process. Four out of five expect AI and/or machine learning to be fully integrated into the trading process in 3-5 years, and that their firm will have internal AI expertise within that timeframe.
Reflecting that rapid adoption, the capital markets professionals participating in a new Greenwich Associates study rank AI as the most disruptive technology in financial markets. “This is particularly true of millennials, two-thirds of whom see AI as being very disruptive in the coming years, as opposed to only half of Gen Xers,” says Kevin McPartland, Head of Research in Greenwich Associates Market Structure and Technology Group and author of The Future of Trading: Technology in 2024 – The Impact of AI, Big Data and Analytics on Your Trading Desk. The report assesses what tools and technologies will have the biggest impact on financial markets, the use of AI, big data deployment and the impact (or lack thereof) of cryptocurrencies.
Despite this market enthusiasm, a very small percentage of current AI applications in capital markets are close to the complex products from Google, Apple and their peers. One of the biggest impediments to date has been data availability. “Those global technology giants have access to the habits and data of billions of people around the world,” says Kevin McPartland. “Most financial services firms, on the other hand, are still working hard at normalizing the data they do have, are struggling to work within privacy rules surrounding customer data, and often work with such limited data sets that the output is still more art than science.”
That situation will change as investors, broker-dealers, exchanges, and technology vendors continue to improve both their AI platforms and datasets. More than 60% of study participants expect AI-focused budgets to increase. Even firms not planning to expand already significant levels of technology spending aren’t just accepting the status quo. “Many buy side institutions feel strongly that the best way to advance an emerging technology is to leave long-term development to IT providers, and then implement resulting innovations in AI and other areas to improve their businesses,” says Kevin McPartland.