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Bot trader alert: research reveals real threat of AI wreaking havoc in trading environments

AI and bots could pose a real threat when it comes to market manipulation, according to research released by UK-based RegTech (Regulatory Technology) scaleup eflow Global.

The new research from 250 senior compliance professionals in the financial services sector reveals that 75% of companies are worried about bots manipulating markets and being able to cover up their actions. 21% would go as far as saying they are ‘extremely worried’, and it poses ‘a real threat’ to the future of trading.

When asked to what extent they believed financial professionals using AI bots to manipulate the market is an industry challenge, 94% acknowledged it as a challenge, with 36% stating it is on a significant scale.

The issues are detailed in the upcoming Global trends in market abuse and trade surveillance report, launching  in early February, which will present an extensive deep dive into the problems that regulated firms are experiencing across global markets. In this report, the use of AI (57%) will be cited as the most likely cause of compliance issues in the next 12 months, followed by global economic stability (56%).

Ben Parker, CEO and Founder of eflow Global, commented: “We saw how a bot used made-up insider information to make an ‘illegal’ purchase of stocks without disclosing this information, at the recent AI Safety Summit. These are real threats, not just hype, fuelled by the recognition that the regulatory surveillance methods of old are insufficient in the face of evolving market dynamics.”

He continued, “The good news is that AI will also deliver efficiencies and advanced capabilities for both firms and regulators, with firms turning to AI and RegTech to better monitor and combat market abuse. However, firms need a clear understanding of how these algorithms operate, as well as how more sophisticated technology will need to be deployed to protect them,” Ben added.

Asked about their firm’s investment in compliance technology to protect their organisation from the challenges associated with AI bots, 92% of regulatory professionals stated they had already made an investment, with 41% describing it as ‘significant’.

The full report will be available for download in early February.

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About eflow Global Founded in 2004, eflow Global provides financial firms with technology solutions to help them comply with their regulatory requirements in a more streamlined, efficient and robust way. It offers award-winning solutions for market abuse surveillance, best execution, transaction-cost analysis, transaction reporting and eComms surveillance. The company currently services over 100 clients across five continents, providing both buy-side and sell-side firms with highly configurable digital tools that are designed to keep them compliant and competitive in this ever-changing regulatory landscape. eflow’s regulatory solutions are delivered through a PATH, a unique digital ecosystem that offers the speed, convenience and efficiency of off-the-shelf software, combined with a level of customisation that is typically only associated with a bespoke platform.

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