Ontario’s capital market participants are currently using AI to enhance their existing products and services rather than creating new ones, according to a new report by the Ontario Securities Commission (OSC).
AI is supporting a diverse range of capital market processes, including asset allocation, price and liquidity forecasting, hedging, trade order execution and surveillance, high-frequency trading, futures market analysis, and sales and marketing, according to the report.
“AI’s transformative potential is undeniable. We undertook this research to better understand how AI is being developed, tested and used by capital market participants in Ontario,” said Grant Vingoe, CEO of the OSC.
“AI has the potential to impact processes and stakeholders throughout our capital markets and raises important questions about managing risk, governance, and the potential for malicious use. As industry shifts towards wider adoption, collaboration among regulators, market participants and innovators is critical to support responsible innovation,” he added.
Currently, AI is being used to improve the efficiency and, in some cases, effectiveness of these processes. This includes improving the quality of data available by detecting patterns, trends and anomalies with greater precision, according to the findings.
AI systems can streamline complex tasks, optimize processes and uncover hidden insights and trends, all while learning and refining their capabilities. At the same time, the disruptive nature of AI systems has raised important questions about the role of regulation and governance in managing risks as well as the potential for its malicious use.
The report highlights current AI use cases, benefits and challenges, and aims to raise awareness of both the opportunities and risks associated with the use of AI in capital markets.
According to the findings, the most mature use of AI in capital markets is focused on three principal areas: (i) improving the efficiency and accuracy of operational processes; (ii) trade surveillance and detection of market manipulation; and (iii) supporting advisory and customer service.
Areas such as asset allocation and risk management show less maturity in Canada, according to the report.
Capital market participants can share feedback on how AI is impacting the investment industry through OSC IdeaHub , a new public participation platform for capital market participants to share ideas that contribute to the OSC’s efforts to foster innovation and economic growth.
“We want to be more proactive in our approach to technological innovation in the investment industry, and we encourage those leading the charge in AI deployment to get in touch with us,” said Pat Chaukos, Director of the OSC Innovation Office.
“Through collaboration and the building and sharing of knowledge, we can shape a fair, efficient and future-ready approach to innovation in AI that benefits investors and market participants.”
