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Wednesday, March 19, 2025
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Morgan Stanley Research Launches AskResearchGPT

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Press Release
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The generative AI-powered assistant for Investment Banking, Sales & Trading and Research supports staff in efficiently surfacing and distilling high-quality insights from the expansive body of Morgan Stanley Research

Morgan Stanley Research announced the launch of AskResearchGPT, a unique generative AI-based assistant that addresses the needs of the bank’s Investment Banking, Sales & Trading and Research staff. AskResearchGPT can be leveraged to look for data, obtain insights and summarize information from the firm’s expansive body of Research – more than 70,000 proprietary reports published annually. With convenient, one-click access within their day-to-day workflow, the generative AI tool gives staff a more comprehensive, in-depth view of the most current Research information, so they can provide the firm’s institutional clients with higher quality service in a more effective manner.

“AskResearchGPT is emblematic of our tech-forward philosophy in Institutional Securities,” said Katy Huberty, Global Director of Research and Co-Chair of the Morgan Stanley AI Steering Committee. “Our most important objective is to provide our clients with world class analysis and information to help them generate alpha. AskResearchGPT boosts our employees’ ability to support our clients with just that – better and at scale.”

AskResearchGPT is a generative AI-based augmentation to the already popular AskResearch application, a chatbot that helps pinpoint data, key findings and analyst ratings from the vast library of Morgan Stanley Research reports. In AskResearchGPT, OpenAI’s GPT-4 model is supercharging the capabilities of the original tool by synthesizing unstructured data, empowering users to address more complex questions by drawing comprehensive insights and summaries from multiple research products. AskResearchGPT is conveniently accessible across the suite of productivity and communication tools used every day, facilitating seamless access to research whenever needed.

Additionally, the assistant is paired with a workflow solution, patented by Morgan Stanley, which gives staff a single-click option to transfer findings of their queries into an email draft ready to be modified and customized before sharing with their clients. Findings include hyperlinks to citations of relevant research materials providing staff and clients with the ability to dive deeper into the original research.

“AskResearchGPT gives our client-facing teams a leg up, freeing capacity to more deeply engage with clients while providing better than ever service. It is an important step in delivering a firmwide Research platform that is not only omnipresent across our tools but will ultimately extend its capabilities with other information sources, skills and languages,” said Eden Kidner, Head of Technology Strategy for Morgan Stanley Research. “We continue to experiment with the most recent generative AI improvements, identifying other opportunities to enhance our employee and client engagement.”

Morgan Stanley has leveraged AI and machine learning for over a decade to boost productivity and client service. The firm pioneered the use of generative AI on Wall Street with its unique partnership with Open AI, which was announced in spring of 2023. AskResearchGPT is the first use case in the Institutional Securities arena, joining a continuously growing suite of generative AI powered tools including the AI @ Morgan Stanley Assistant and AI @ Morgan Stanley Debrief, which were successfully rolled out to the firm’s Wealth Management financial advisors and staff over the course of the past year.

Source: Morgan Stanley

BofA’s AI Patents Increase 94% Since 2022

By
Anna Lyudvig
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Bank of America’s patent portfolio has seen a 94% increase in artificial intelligence (AI) and machine learning (ML) granted patents and pending patent applications since 2022.

Aditya Bhasin

“Our approach to AI includes human oversight, transparency, and accountability for all outcomes. Our investments in it and other technologies also help drive operational efficiencies and responsible growth,” Aditya Bhasin, Bank of America’s Chief Technology & Information Officer, told Traders Magazine.

Bank of America spends over $12 billion annually on technology, of which approximately $4 billion will be directed to new technology initiatives in 2024. 

These ongoing investments continue to enhance client experiences and to drive operational efficiencies.

 “We innovate to meet and anticipate our clients’ needs. As our pace of innovation accelerates, we’re continually listening to clients and building solutions to improve and simplify their experiences,” Bhasin said. 

“Such has been the case with our approach to AI, machine learning, and related technology for many years – the use of which centers on the benefits to our clients and employees,” he added.

In addition to artificial intelligence and machine learning, other technology categories in which new patents have been granted to Bank of America this year include information security, online and mobile banking, payments, data analytics, and augmented and virtual reality.

Source: Bank of America

Overall, the bank holds nearly 7,000 granted patents and pending patent applications, and the most granted patents of any financial services company.   

According to BofA, this is thanks to the creativity of its more than 7,500 talented inventors based in 14 countries and 42 U.S. states, and a culture that empowers teammates to explore and develop innovative solutions for individuals and businesses around the world.

AI and ML enable banks to analyze large volumes of data, offering insights that drive efficiency and innovation.

For example, in Global Markets – Bank of America’s internal facing chatbot leverages natural language processing and machine learning to answer queries that arise during the trading day – continually improving the accuracy of responses based on previously answered questions. 

Deployed to over 20 areas of Global Markets, the chatbot connects the company’s proprietary systems and databases to deliver intuitive responses to trading-related questions such as real-time market depth, trending indicators, historical trading volumes, current exposures, and unmatched or cancelled trades. This enables traders to respond to client inquiries with greater consistency and speed, and with higher quality data.

Another example include Erica, an AI-driven virtual financial assistant. More than 45 million clients have used Erica and this has led to 2.4 billion interactions with Erica since its launch in 2018. Over the last six years, Erica’s capabilities have expanded to support individual and corporate clients, including within Merrill, Benefits OnLine, and the company’s award-winning CashPro platform.

In addition, launched in 2020, Client Insights uses AI-enabled data analytics to help Merrill Wealth Management and Bank of America Private Bank advisors identify, manage and act on changes in client circumstances. This leads to opportunities to best serve clients’ tax harvesting, retirement planning, and student banking needs, and more. Over 30 million insights have been delivered to advisors since launch, helping them and their teams proactively connect with clients about these timely and relevant opportunities.  

J.P. Morgan Launches Private Markets Data Solutions

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Press Release
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J.P. Morgan announced the launch of its Private Markets Data Solutions for institutional investors, available through Fusion by J.P. Morgan. This is a comprehensive data management solution for private assets that enables investors, both General Partners (GP) and Limited Partners (LP), to analyze and gain transparency into their complete portfolio across public and private holdings and eliminate the manual processes of managing this operational workflow at scale.

The growth of alternative portfolios has presented investors with unique data challenges. The lack of a single, standardized source for private markets means investors are left with incomplete and fragmented data that is difficult to analyze. The process of manually extracting and integrating data from unstructured sources is time-consuming, costly, and error prone. Managing multiple vendors, data feeds, and portfolio administrators complicates data consolidation and transparency, affecting decision-making and necessitating specialized expertise and scalable technology, which further escalates costs and delays time to market.

Fusion minimizes the need for resource-intensive processes by offloading this workload to algorithms that work automatically, accelerating time to insights. Data is ingested from J.P. Morgan Securities Services and portfolio administrators, which is then complemented with reference data from vendors. Developed by J.P. Morgan’s data experts, Fusion’s proprietary AI-ML technology helps correct discrepancies and incompleteness and applies standard identifiers for consistency and easy interoperability. Clients receive standardized, enriched data that is consistent across diverse asset classes like private equity, real estate, venture capital, natural resources, and infrastructure, while preserving granular detail and linkage.

Tim Fitzgerald, Global Head of Securities Services, said, “Securities Services is committed to helping clients meet the challenges of an increasingly competitive private asset market with innovative data-driven solutions. Our platform empowers clients with more information to drive their decision making, while optimizing their workflow.”

To offer clients a single source for more complete, high-quality data that works across public and private assets, Fusion has incorporated data from Aumni, J.P. Morgan’s private capital platform, and external leading data providers like Canoe Intelligence, MSCI Private Capital Solutions, and PitchBook. Investors can analyze and manage their data with the Fusion Data Explorer tool, allowing them to drill down into underlying assets and navigate across linked data points, for a deeper understanding of their holdings.

Gerard Francis, Head of Fusion, said, “Fusion is uniquely positioned to integrate private markets and client investment data, leveraging proprietary graph technology and AI-ML models for comprehensive portfolio transparency and interoperability. Our cloud-native platform supports data from multiple portfolio administrators and vendors, ensuring seamless integration, scalability, and a streamlined experience without legacy infrastructure constraints.”

Fusion’s Data Mesh supports a variety of cloud-native channels, designed to simplify the process of integrating Fusion data into clients’ existing technology stack. For business users, the newly launched Fusion Drive enables desktop applications like Excel, Tableau, and Alteryx to connect directly to Fusion data, and receive updates automatically.

Learn more: fusion.jpmorgan.com/solutions/private-markets

Key Capabilities:

  • Private markets data integration: Fusion takes in reference data from leading providers like Aumni (J.P. Morgan’s private capital platform), Canoe Intelligence, MSCI Private Capital Solutions, and PitchBook.
  • Data ingestion from multiple fund and portfolio administrators: Fusion supports portfolio data from J.P. Morgan Securities Services and other portfolio administrators that clients use. Data is harmonized for seamless interoperability across administrators.
  • Data normalization: Data is normalized to look and feel the same, so it’s ready to be used across investors’ operating models. Fusion models data for clarity and consistency, applying standard identifiers and linking relevant datapoints.
  • Complete portfolio view and Data Explorer: Investors can view, analyze, and drill down into private market data using an intuitive exploration tool. The linked data model enables interoperability between private and public asset classes, portfolios and accounts, to easily dive deep and analyze.
  • Data management: Fusion gives clients powerful controls to apply rules-based adjustments and overrides to data. This functionality allows users to ensure data is fit-for-purpose across multiple lines of business without altering the underlying data or linkage.
  • Data Mesh: Fusion offers a suite of cloud-native channels for clients to integrate Fusion data directly into their tech stacks, including API, Jupyter Notebook, Snowflake, Databricks and more. Connect data directly to your desktop applications with Fusion Drive.

Source: J.P. Morgan

ATSs Bring Innovation to Equity Trading

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Press Release
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Equity traders looking to stay ahead of the curve—and the competition—are turning to alternative trading systems (ATSs) that are experimenting with new innovative features to improve trading outcomes.

About 16% of U.S. equity volumes overall are currently executed via ATS and could be accounting for at least half of the liquidity needs for institutional traders. Traders are attracted to these systems for their potential ability to deliver high-quality execution and enhanced liquidity with less information leakage and impact.

Three innovative ATSs, IntelligentCross, OneChronos and PureStream, are winning over the hearts of market-savvy buy- and sell-side firms. One of the main benefits of these providers is their ability to innovate.

“ATSs are incubators in a market structure laboratory, with less stringent rule sets than exchanges,” says Jesse Forster, Senior Analyst at Coalition Greenwich Market Structure & Technology and author of The Innovators: How and Why Alternative Trading Systems Succeed.

Unlike traditional trading venues, ATSs introduce an element of unpredictability in their outcomes, making them less attractive to ultra-low-latency strategies and reducing market impact. This is a feature, not a bug. As both the buy side and sell side seek out the benefits these new platforms can deliver, forward-thinking brokers are embracing these ATSs, recognizing the advantage of having multiple venues to experiment with.

“The ATSs gaining traction today have sparked a hunger for further innovation, paving the way for the next generation of groundbreaking trading venues to emerge,” says Jesse Forster.

The Innovators: How and Why Alternative Trading Systems Succeed examines current usage rates and trader interest in ATS, analyzes buy- and sell-side perspectives of current ATS offerings and looks at what might come next in ATS innovation.

Source: Coalition Greenwich

Dimensional Fund Advisors Remembers John “Mac” McQuown

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Press Release
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Remembering John “Mac” McQuown, Whose Curiosity Drove a Life of Innovation

Tribute_JM_E1

Source: Dimensional Fund Advisors

John “Mac” McQuown, a founding Director of Dimensional Fund Advisors in 1981, was a financial engineer, entrepreneur, and environmentalist with an insatiable curiosity and relentless drive that led him to start more than a dozen companies in his lifetime.

A self-described “data dog,” Mac was a pioneer in the transformation of investing from guesswork into a science guided by academic research.

In the 1970s, he assembled a team at Wells Fargo Bank that developed one of the first index funds—the investment vehicle whose rise would later revolutionize the financial world. And after helping launch Dimensional, Mac remained on the company’s board while he pursued interests that ranged from bond-investing innovations to sustainable farming to wine making. He died on October 22, 2024, at age 90. He is survived by his wife, Leslie, his son, Morgan, and his daughter-in-law, Alexa.

“To bring about fundamental change, you need great thinkers and researchers, but you also need implementers,” Dimensional Founder David Booth told Bloomberg Markets magazine in 2015. “People like Mac don’t win Nobel Prizes; they implement the ideas of the guys who do.” The descriptions of his life in this article are based on years of written and recorded recollections from Dimensional employees and others associated with the firm, except where otherwise noted.

The full tribute can be read here

Source: Dimensional Fund Advisors

ACCESS ASIA: SGX FX Aims to Grow Electronic FX Options Trading

By
Shanny Basar
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Lee Beng Hong, CEO of SGX FX and head of wholesale markets & platforms at Singapore Exchange (SGX Group), said the company would like to grow electronic trading of currency options as average daily volume (ADV) of both over-the-counter and exchange-traded derivatives reached a record.

SGX reported that OTC FX ADV surpassed its target by increasing 47% to reach $111bn in the last financial year, between 1 July 2023 and 30 June 2024. In the same period, FX futures ADV grew 36% to about 204,000 contracts. In September this year, combined OTC and futures ADV reached a notional $168bn.

 Lee Beng Hong, SGX

Lee told Markets Media: “One pillar that SGX FX wants to grow is electronic trading of options. Unlike the rest of the FX market, the options market is still traded largely bilaterally or on voice. There is a big opportunity to bring the same efficiency we provide into the options market to uplift the overall efficiency of the entire market.”

The fixed income, currencies and commodities (FICC) segment has had a compound annual growth rate of more than 20% in the previous three financial years, according to SGX’s 2024 full-year results. 

Lee said SGX expects strong momentum in FX futures due to greater adoption and market conditions, but also because of regulations such as the uncleared margin rules, which make it more capital intensive to use uncleared products.

“There is no product that is more capital efficient than one that is centrally cleared on an exchange,” he added.

A differentiator for SGX is that it solves for access to both liquid and illiquid FX products, and continues to invest in new solutions, technology and automation, according to Lee. He continued that SGX has launched a unique tool, Trading Plan (T-Plan), which allows OTC FX clients to automate executions based on the market environment and their predefined parameters. SGX has also created tools to make it more efficient for clients to automate and optimize FX hedging across multiple portfolios, multiple cash flows and multiple currencies.

“SGX FX’s sole purpose is to provide the best-in-class solution for clients, to improve efficiency through automation and to improve the quality of their execution,” said Lee. “Our job is to build their dream.”

Asian currencies

Lee is personally bullish around Asian currencies as he believes interest rate differentials are going to drive capital flows. In September, SGX reported that USD/CNH FX futures traded volume increased 23% year-on-year to 3.5 million contracts, lifting total futures volume in FX by 35% to 5.5 million contracts.

That followed a record ADV of KRW/USD FX futures, which rose to a new high of 17,483 lots in August, a 66.5% month-on-month jump which SGX said was due to the effect of the yen carry trade unwind spilling over to other funding currencies.

Trading volume in international Chinese renminbi futures – the SGX contract remains the world’s most widely traded international futures for the currency – has reached $15bn a day, up from $4bn about five years ago. Indian rupee futures volume has increased to $2bn a day, according to Lee.

“Our FX futures are becoming chunky and I would say that it is almost irresponsible if a trader only looks at OTC when they have a venue that is as big as SGX in CNH or Indian rupee futures,” he mused. “Korea is in the process of opening up access to offshore participants and we are the biggest international market for Korean won futures.”

Source: SGX FX

SGX’s focus is to continue to invest in China, India and the rest of Asia beyond FX and into rates. Lee highlighted the success of the new three-month Tokyo overnight average rate (TONA) futures contract, which was launched on 29 July this year, building upon SGX’s existing long-term Japanese interest rate futures. In September, the exchange reported that TONA futures reached 44,928 contracts.

Data and analytics

Another pillar of growth for SGX FX is data and analytics, and using machine learning and artificial intelligence to provide insights to clients.

“SGX FX facilitates around $140bn a day in OTC FX trades and clients want to get specific insights for their interactions,” added Lee.

SGX FX has a data team that has been working on allowing clients to extract information on their interactions, the market and the way they trade. For example, when a trader gets into the office, they can get a report that tells them that they are not dealing as much with a particular client or liquidity provider and the reason why. Another possible use case is to highlight potential execution strategies for a trade.

“The trend is more electronification, more demand for insights and more demand for automation,” said Lee. “Once you give clients the right data, you can build that whole flywheel of adoption.”

Fidelity, Stone Coast to Offer New Bundle for Hedge Funds

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Press Release
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Access to prime brokerage, Fidelity’s PB Optimize technology, fund administration and Stone Coast’s “golden source” data encompasses new end-to-end offering.

BOSTON, October 21, 2024 — Fidelity Prime Services, a premier prime brokerage for institutional alternative asset managers, announces a strategic relationship with Stone Coast Fund Services, a leading independent, privately-owned fund administrator with over $100B in assets under administration (AUA), to create a holistic, end-to-end offering for hedge funds.

The strategic relationship will create a new bundle of solutions for established and emerging hedge funds to consider, including prime brokerage access, fund administration, and access to Fidelity’s PB Optimize fintech platform and Stone Coast’s “golden source” data.

“Cutting-edge technology and exceptional client service are what both Fidelity and Stone Coast continually strive to deliver to our clients,” said James Coughlin, Senior Vice President, Fidelity Prime Services at Fidelity Investments. “This strategic relationship embodies our joint vision of providing an end-to-end integrated technology offering for fund managers, with cost efficiency and exceptional service at the forefront.

Key relationship highlights include:

  • Best-in-class Technology: The bundled offering includes access to Fidelity’s PB Optimize financing and treasury platform and Stone Coast’s golden source fund data, creating operational synergies and real-time insights for clients to make the most well-informed decisions for their portfolios.
  • Improved Economics: This strategic relationship delivers improved economics and cost efficiencies for hedge funds through the combination of prime brokerage and hedge fund administration services, allowing funds to focus less on administrative overhead and more on growth and investment strategies.
  • Client-First Excellence: Two established firms, Fidelity and Stone Coast, are coming together to deliver an end-to-end offering for hedge funds and alternative asset managers with a focus on client service, technology, and deep-rooted expertise.
  •  

“Working with a like-minded firm such as Fidelity Prime Services, which shares our commitment to client excellence and superior technology, was a natural fit for Stone Coast,” said Marc Keffer, Founder and Principal, Stone Coast Fund Services. “By combining our ‘golden source’ fund data with Fidelity’s innovative PB Optimize platform, we are poised to offer clients an integrated solution that enhances portfolio decision-making.”

For more information on the bundled solutions offering, please contact fidelityprime@fmr.com          

About Fidelity Prime Services: Fidelity Prime Services is an offering of Fidelity Capital Markets, providing consolidated prime brokerage for institutional alternative investment managers, and specializing in serving hedge fund managers who employ long and short equity strategies. Prime Services serves over 200 clients with offices in Boston, New York, and San Francisco.

About PB Optimize: PB Optimize (PBO) launched in 2012 as a securities finance solution designed to provide transparency into the global securities market with the goal of utilizing data and technology to help improve client outcomes. PBO services over 280 institutions and investors across Fidelity Investments’ Capital Markets Group, overseeing $5 trillion in assets under administration (AUA) and providing over $450 million in realized savings.

About Stone Coast Fund Services: Stone Coast Fund Services, servicing over 100 clients with over $100 billion in AUA, stands as the largest independent, privately-owned fund administrator. Known for its commitment to quality and precision, Stone Coast provides a full range of fund administration services to its global clientele with superior customer service and technology offerings. The firm is based in Portland, Maine.

SIFMA to Host Market Structure Conference in NYC November 6-7

By
Press Release
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New York, NY, October 22, 2024 – SIFMA will host its Market Structure Conference on November 6th and 7th in New York City.  A virtual option will be available for reporters outside of NYC.

The program on November 6th will explore listed options.  Topics that day include:

  • State of the Options Industry
  • Sorting Out the Numbers: What Happened on Election Day?
  • Regulatory Developments and Clearing Updates
  • What’s Next for Options Market Structure
  • What’s Driving Options Customers?

The program on November 7th will explore equities.  Topics that day include:

  • Reg NMS Take 2: Where is Equity Market Structure Headed?
  • Market Regulation and Resiliency
  • Market Centers: Competition, Innovation… What’s Next?
  • Trends in Retail Trading

For more information, please click here.

WHAT:            SIFMA Market Structure Conference

WHERE:           New York Law School, 185 West Broadway, New York, NY; a virtual option is available for reporters outside of NYC

WHEN:            November 6th and 7th, 9:30 am – 4:30 pm

MEDIA RSVP:Katrina Cavalli, kcavalli@sifma.org   

SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).

RavenPack Unveils Bigdata AI Platform

By
Anna Lyudvig
-

Buy-side professionals are inundated with data, but they need real-time, trusted financial information and, critically, a way to make sense of it quickly, according to Armando Gonzalez, CEO of RavenPack.

Armando Gonzalez

“The problem is that this data is often scattered across public sources, locked behind paywalls, or siloed within organizations,” he told Traders Magazine.

To address this issue, RavenPack has launched Bigdata.com, an advanced AI platform set to transform financial research and decision making. 

“With Bigdata.com you can access it and “chat” with all of it,” Gonzalez said.

Bigdata.com’s powerful API and real-time research assistant let users converse directly with billions of financial documents, create custom research tools, automate tasks, and access real-time data. 

“AI tools promised a revolution in finance but often fell short. Financial professionals cannot work with generic, outdated, or inaccurate information,” Gonzalez said. 

He added that Bigdata.com changes this by offering reliable, transparent AI-driven research that’s “actually useful”. 

“Our platform doesn’t just provide information; it automates and accelerates the research process,” he stressed.

What once took days or weeks can now be done in hours, because teams can now interact directly with a universe of curated financial data in real time, Gonzalez explained. 

For example, teams combing through earnings reports can now instantly analyze and summarize key metrics, like revenue or EPS, and spot any deviations from expectations, which helps to quickly reassess risk exposure or rebalance portfolios to mitigate risk, he said.

The development of Bigdata.com is backed by a $20 million investment led by GP Bullhound and spearheaded by a team of former quantitative analysts and data scientists from leading financial institutions. 

Since launching in Beta in July 2024, over 40 leading financial institutions have been deploying Bigdata.com. 

This includes four major global investment banks, a top five credit-focused hedge fund, and 10 of the largest asset management firms worldwide.

“Our +20-year track record speaks for itself, with clients like JPMorgan Chase, UBS, and the US Federal Reserve. Now, we’re making this high-quality data available to everyone through a real-time research platform,” Gonzalez said.

“Our “data-first” approach integrates over two decades of expertise with real-time, curated insights, ensuring accuracy and traceability for every piece of information,” he added.

Gonzalez added that they also built a finance-specific taxonomy from scratch, ensuring that the insights are relevant and use precise financial terminology. 

He said that their Financial Knowledge Graph, with 12M+ entities, helps users filter and discover critical information, and our domain-specific embeddings capture the nuances of financial language. 

Additionally, users can create custom watchlists with specific portfolios or themes or “chat” with specific datasets, he added. 

“This level of personalization, transparency, and reliability is something you won’t find in other AI platforms,” Gonzalez argued.

According to Gonzalez, the AI platform boosts financial research efficiency tenfold: “Our claim of a 10x efficiency boost is grounded in real results from our beta users. Financial firms are slashing the time it takes to go from research to action.” 

He further said that tasks that once took days or weeks – like analyzing earnings, monitoring portfolios or building investment theses – can now be completed in hours.  

For example, he said, clients use our system to analyze which companies may do better under a Trump presidency versus a Harris victory in just a few hours, a task that would have taken a team at least one week. 

“This kind of speed enables buy-side firms to reposition portfolios or make allocation decisions in real time, capturing opportunities before anyone else. The goal isn’t to cut costs or replace people, but to help them achieve much more with the same resources,” he commented.

Bigdata.com offers a vast range of financial data, including web content, premium news, earnings reports, regulatory filings, pricing data, estimates, and sentiment scores. 

Users can also upload and extract insights from their own files or customize their research by  “chatting” with specific datasets for tailored insights, and we’re constantly expanding this universe.

Gonzalez said that they’ ’re focused on enhancing AI’s practical utility in finance. 

“Soon, we’ll add alternative data sources like social media trends, satellite imagery, and geolocation insights,” he said. 

“We’re also developing more specialized AI agents to handle financial tasks with unprecedented precision,” he concluded.

TECH TUESDAY: AI Optimizes OTC Derivatives Risk Calculations

By
Editorial Staff
-

TECH TUESDAY is a weekly content series covering all aspects of capital markets technology. TECH TUESDAY is produced in collaboration with Nasdaq.

Artificial intelligence continues to draw attention and make headlines as the emerging technology that many expect will transform how capital markets firms operate.

The development of generative artificial intelligence, the newest iteration of AI, is considered to be in its early stages, with few bounds on potential capabilities. But AI is driving value today by automating the data extraction, quantitative analysis and regulatory reporting that historically have absorbed an enormous allocation of person-hours.

BlackRock, the world’s largest investment manager, outlined its approach to AI and machine learning in a July 2024 blog post. “We leverage these capabilities with the goal of continually shifting from the realm of qualitative to quantitative, increasing the breadth of what we’re able to measure in pursuit of more precise and differentiated investment outcomes,” the blog stated. 

In the financial industry’s latest AI deployment to increase automation and efficiency, Nasdaq has integrated AI to simplify and accelerate bank and insurance risk calculations. 

Nasdaq noted that market volatility and tighter regulation enacted after the global financial crisis of 2007-2008 are forcing institutional firms that trade over the counter (OTC) derivatives to conduct complex and computationally intensive risk calculations. Specifically, X-value adjustment (XVA) sensitivity analysis can require more than 1 trillion calculations per day; Nasdaq’s recently announced AI-based machine learning functionality, provided through its Calypso platform, can process risk calculations up to 100 times faster.  

Gil Guillaumey, Senior Vice President and Head of Capital Markets Technology at Nasdaq, commented on the utility of Nasdaq Calypso’s XVA Accelerator functionality:

Gil Guillaumey, Nasdaq

“Maintaining the necessary infrastructure and systems can be outrageously expensive, inefficient, and increasingly impractical regardless of cloud elasticity strategies,” Guillaumey said in an October 17 press release. “The sheer scale of computing power required to meet the most demanding regulations, alongside the strategic benefits of more accurate real-time analytics, is driving a profound rethink about how we can leverage AI to reduce the cost of compliance.” 

Nasdaq’s XVA Accelerator uses a mathematical approach known as Chebyshev Tensors. Importantly, this approach recalibrates each time an XVA calculation is launched and adapts immediately to changing market conditions – the end results are significantly improved execution times, lower costs, and more empowerment for financial institutions to manage risk.

Such results tie in with the current landscape for AI, in which firms need to see the technology move the needle on the bottom line. In Deloitte’s State of Generative AI in the Enterprise Q3 2024 report, the consultancy cited an overarching theme of moving from potential to performance.

“In the rapidly evolving landscape of artificial intelligence (AI), the connection between technology and value has become increasingly apparent,” the report stated. “Technology application on its own is not enough. Results and business outcomes matter. The real measure of success for GenAI will be how it enables enterprise strategies and drives tangible value.”

Creating tomorrow’s markets today. Find out more about Nasdaq’s offerings to drive your business forward here.

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