The Securities and Exchange Commission (SEC) has approved Nasdaq to integrate Artificial Intelligence to speed up the processing of market orders.
By implementing Artificial Intelligence (AI), Nasdaq aims to make stock trading even more automated and efficient, marking an innovative milestone in the financial industry.
According to the exchange, which is currently the second largest stock market in the United States, last weekend it received approval from the SEC to incorporate Artificial Intelligence into capital markets, in order to modernize these financial markets and improve the trading experience for investors.
Nasdaq highlighted that AI will allow it improve efficiency and performance of the stock market, while continuing to drive innovation and technological development.
Following SEC approval, Nasdaq has become the first stock exchange to launch an AI-powered ordering system.
Dynamic M-ELO, the first AI-powered order type
Called Dynamic Midpoint Extended Life Order (M-ELO), this market order type is designed to streamline the existing M-ELO automated order type by incorporating AI capabilities to improve order execution quality, liquidity and reduce market impact in real-time.
According to Nasdaq, the integration of AI into the traditional M-ELO order type resulted in a 20,3% increase in fill rates and an 11,4% reduction in markups. To achieve these results, the stock exchange conducted extensive research on the impact of Artificial Intelligence on market orders.
Kevin Kennedy, Executive Vice President of North American Trading Services at Nasdaq, said Dynamic M-ELO allows investors to intelligently adapt to market conditions in real time, making it a solution that improves efficiency and creates a much more dynamic market environment.
Linq, a Blockchain-based solution
On the other hand, Nasdaq has been Harnessing the potential of emerging technologies, including blockchain technology, in recent years to improve its efficiency and performance.
In 2016, the exchange introduced Linq, a solution designed to enable private companies to digitally represent stock ownership using the blockchain. Linq leverages Bitcoin’s underlying technology to power private markets and optimize the distribution of information, thereby making private markets more efficient, interoperable, and less costly.
Fredrik Voss, Vice President of Blockchain Innovation at Nasdaq, said that in addition to improving market efficiency, blockchain is called upon to respond to needs and challenges that cannot be solved with traditional financial technology and that, in addition to this, blockchain will be there in the future to solve those needs that have yet to be identified.
Last year, in partnership with digital asset investment fund Hashdex, Nasdaq launched a training program focused on educating financial professionals and advisors about the disruptive potential of blockchain technology. The exchange also incorporated AI into its options markets in the United States this year.
Continue reading: Oxford University trains Artificial Intelligence for trading
