Artificial intelligence in EU securities markets

Summary The use of artificial intelligence (AI) in finance is under increasing scrutiny from regulators and supervisors interested in examining its development and the related potential risks. This article contributes by providing an overview of AI use cases across securities markets in the EU and assessing the degree of adoption of AI-based tools. In asset management, an increasing number of managers leverage AI in investment strategies, risk management and compliance. However, only a few of them have developed a fully AI-based investment process and publicly promote the use of AI. In trading, AI models allow traders, brokers, and financial institutions to optimise trade execution and post-trade processes, reducing the market impact of large orders and minimising settlement failures. In other parts of the market, some credit rating agencies, proxy advisory firms and other financial market participants also use AI tools, mostly to enhance information sourcing and data analysis. Overall, although AI is increasingly adopted to support and optimise certain activities, this does not seem to be leading to a fast and disruptive overhaul of business processes. A widespread use of AI comes with risks. In particular, increased uptake may lead to the concentration of systems and models among a few ‘big players’. These circumstances warrant further attention and monitoring to continue ensuring that AI developments and the related potential risks are well understood and taken into account.