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Tony Sio, Head of Regulatory Strategy and Innovation, spoke about how Nasdaq is leveraging artificial intelligence at the AWS Financial Services Symposium, which was held June 6 in New York.
The event convened financial services firms to discuss how they work with AWS to manage and optimize the power of data to deliver better experiences to their customers, make smarter business decisions, and fortify critical applications.
Sio highlighted innovation around the technology itself, collaboration with partners, and speed in getting products to market as critical factors in optimizing AI.
“Building the AI portion is only one part of the challenge,” Sio said. “There’s also understanding the problems users are trying to solve, understanding the regulatory context, and then the actual delivery approach. We need to make it so that people can actually use it, not just experiment in a sandbox.”
Sio noted that Nasdaq is deploying AI and machine learning to create efficiencies in its own business as an exchange operator, and the firm is also rolling out products to support the technology suites of banks, asset managers, and other exchanges.
With regard to specific AI applications, Sio highlighted three, starting with Dynamic M-ELO, which Nasdaq introduced earlier this year. The first exchange AI-powered order type, Dynamic M-ELO is designed for market participants who have longer holding periods and don’t have the most need for execution speed.
“Dynamic M-ELO enables you to find other like-minded traders who are trying to minimize market impact,” Sio said. “We use machine learning to try to dynamically choose the appropriate amount of time that orders sit. Every 30 seconds we adjust the sitting time based upon market conditions to give the best execution quality.”
Next, Sio said Nasdaq utilizes AI to support investment firms in their mission to choose compatible investments aligned with ESG criteria. “It can be quite difficult to manage the huge volume of corporate offerings to try to figure out the firms that meet their requirements. We can streamline that process.”
Thirdly, Sio cited trade surveillance as a key area where AI is raising the bar. “We all want fair and orderly markets with no disruptions or bad behavior,” he said. “We provide tools with which to find bad behavior and anomalies – ‘pump and dump’ schemes, spoofing, algos going rogue. Quite a large portion of surveillance analysts’ investigative flow could be made more efficient by using AI.”
Speaking more broadly about AI’s way forward in the financial sector, Sio concluded by noting the importance of developing and building AI products that solve the problem in innovative new ways but will also be understood and approved by regulators.
“At Nasdaq we can have all of the key stakeholders in the room at the start: the technology experts, the experienced industry experts, the delivery experts,” Sio said. “By having that combination from the start, you can create tools which leverage the most appropriate AI technology which truly solves the underlying issues in the market.”
Nasdaq and AWS started working together in 2021, and the technology partnership has included the exchange group moving matching engines, access to market data, and global surveillance offerings to the cloud. AI products are a natural next step forward for the partnership.
“Tony and the team at Nasdaq understand that a successful AI strategy uses the right data and technology to solve the right problem—with security and ease of use,” said Scott Mullins, General Manager of Worldwide Financial Services at AWS. “Nasdaq innovates on behalf of the global capital markets by combining its industry-leading expertise with AWS cloud and AI technologies to solve real-world problems for its clients.”
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