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AI

Nasdaq Receives SEC Approval For AI-Based Trade Orders (cointelegraph.com) 52

Posted by BeauHD from the efficiency-gains dept.
The SEC has approved the Nasdaq's request to operate the first exchange AI-driven order type. CoinTelegraph reports: Called the dynamic midpoint extended life order (M-ELO), the new system expands on the M-ELO automated order type by making it "dynamic," meaning it will use artificial intelligence to update and, essentially, recalibrate itself in real-time. Order types are a set of software instructions that execute specific trade pairs at exact market pricing thresholds. This form of automation has been around for a while, but the new AI-driven order type is the first of its kind to use real-time reinforcement learning AI to execute orders

This should have the follow-on effect of substantially speeding up orders placed with the system. In a blog post accompanying the approval announcement, Nasdaq states that dynamic M-ELO demonstrated a "20.3% increase in fill rates and an 11.4% reduction in mark-outs" during its research and testing. According to a data sheet published by Nasdaq: "Calculated on a symbol-by-symbol basis, this new functionality analyzes 140+ data points every 30 seconds to detect market conditions and optimize the holding period prior to which a trade is eligible to execute." By adjusting the holding periods for orders in real time, as opposed to the traditional system that simply applies static timeouts to orders, fill rates should increase without a significant increase in market impact.
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Nasdaq Receives SEC Approval For AI-Based Trade Orders More

Nasdaq Receives SEC Approval For AI-Based Trade Orders

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  • This is dumb... (Score:4, Insightful)

    by AmazingRuss ( 555076 ) on Friday September 08, 2023 @09:09PM (#63834018)
    ... and will end in blood and tears.
    • So much wisdom in your argument. I'm convinced.

    • Re: (Score:2)

      by HiThere ( 15173 )

      I'm not sure about that. If an orangutan or porpoise can make good stock picks, I see no reason an AI couldn't do as well.

    • and will end in blood and tears.

      Nah, for that we need a billionaire to invest in a ChatGPT-based automated real-time investment firm. We already have the baseline one for destroying professions, AutoGPT for destroying businesses, ChaosGPT trying to destroy the world, and all that's missing now is, er, CoinGPT to go around destroying markets.

  • Shower thought (Score:3)

    by Luckyo ( 1726890 ) on Friday September 08, 2023 @09:17PM (#63834034)

    "Past performance is no guarantee of future results"

    I guess we'll really find out if this is true or not, as AI will literally do that and only that.

  • Well done (Score:5, Insightful)

    by backslashdot ( 95548 ) on Friday September 08, 2023 @09:21PM (#63834040)

    Handing over control of the nuclear arsenal to Skynet is level 1 suicide — lame, but giving it control over the financial system — now that’s boss level suicide.

    • Relax mate. They just added an extra calc somewhere and call it AI because it's the hype of the year 2023.
      • Yup... Read about the AI revolution. Turned out that they were talking about decades old electronic principles. (PID conytoller). Another article was describing revolutionary NUMLS algorithm. Fear not... the "AI" will just screw up similarly to human traders. The system is just unstable from an engineering perspective.

      • That was my thought, they already use cryptuc algorythms to pick stocks just throwing a neural net under it and suddenly it becomes AI and works 0.0001% faster is enough for them.

  • A pox on this (Score:5, Interesting)

    by rickb928 ( 945187 ) on Friday September 08, 2023 @09:25PM (#63834048) Homepage Journal

    There is nothing honest about speeding up stock trading. It is all designed to favor the institutional traders and brokerages.

    But the US stock markets are so overwhelmingly automated that day traders are forced into the game of big data and rush. Individual investors still have to play buy and hold, of course, and resist the brokers' pressure to trade trade trade.

    Oh, crap, it was never fair. Oh well, more unfairness isn't changing anything I guess. Nevermind.

    • How about a public crowd-sourced green hedge fund that has the institutional power to benefit from the financial free lunches the big guys enjoy now?

      • What free lunch? Tell me about it so I can go anf make money, please.
        • >What free lunch?

          Step 1: be rich
          Step 2: build a super fast connection to the stock exchange.
          Step 3: monitor signals from groups and exchanges further away, noting price fluctuations which indicate purchases or sales.
          Step 4: make your trades based on the impending transactions before others can react. Step 5: profit!

          You may now continue to pretend this isn't happening.

          Option 2: Be rich. Buy yourself a seat at the Senate. Do all the inside trading you like, as that is not legal for you.

          Option 3: Be ric
          • I wont comment on option 2 3 4 as thats not the topic at hand. Ok so you're alleging front running essentially. Step3: please tell me more. If you're monitoring exchanges far away, which ones? And what is your target local exchange? How are you fast enough if you have to monitor orders afar? How long do you hold? Does is work every time no matter what or on expectation? What are the potential adverse events during your holding period? Are those exchanges afar significant enough to actually overwhelm local

        • Have you heard of the cross-currency basis, and the persistent decades-long violation of covered interest parity, which means, if you're big enough, you can borrow dollars at one rate and swap them into euros or yen at a higher rate?

    • Re:A pox on this (Score:4, Interesting)

      by Waffle Iron ( 339739 ) on Friday September 08, 2023 @11:18PM (#63834228)

      Individual investors still have to play buy and hold, of course, and resist the brokers' pressure to trade trade trade.

      For individual investors, buying low-cost index funds and holding them has always been the best strategy.

      Not only do you statistically come out as good or better than almost anyone who doesn't have access to insider information, you also avoid wasting time and brain space researching and trading stocks.

      • 40 years of marketing have worked well I see. What ETFs are good at is taking 25-75bps every year you buy and hold. Imagine, instead of a commission when you enter the trade, it's a yearly tax on your capital.

        • Maybe you've been listening to some online broker's marketing. The fund that I have the most in right now has an expense ratio of only 4 basis points per year.

          That's certainly worth my time vs trying to buy and rebalance hundreds of individual stocks.

      • Individual investors still have to play buy and hold, of course, and resist the brokers' pressure to trade trade trade.

        For individual investors, buying low-cost index funds and holding them has always been the best strategy.

        Not only do you statistically come out as good or better than almost anyone who doesn't have access to insider information, you also avoid wasting time and brain space researching and trading stocks.

        . This.

        Yes, it is quite possible to do well as an individual investor. It's a different set of rules though. You play the long game, not the high speed weirdness. And AI in the high speed weirdness will just make it all that weirder. What is likely is that it will freak out, and destroy some companies, and elevate some others to god status. It's going to get really unstable soon, so be careful y'all

    • Re: A pox on this (Score:4, Insightful)

      by e065c8515d206cb0e190 ( 1785896 ) on Saturday September 09, 2023 @01:23AM (#63834322)
      It says it improves fill rates. Remember, the purpose of a market is to match a buyer and a seller. Orders filled means goal achieved. Probably avoids orsers being resubmitted. And don't let the AI word fool you, it's not like they're giving ChatGPT a shot at prop trading. They're probably including a linear regression somewhere that improves things and cal it AI to jump on they hype bandwagon.

      • Not AI. Automation. Yes, higher fill rate improves efficiency. I still see the other side of the coin, improved algorithms might give sub-second advantages to those with cleverer or merely have more resources. It's a game that favors the winners, with which there is no valid argument.

  • If you thought valuations in the market meant nothing before, just wait until we have heavy AI stock trading and the AI traders feeding off each others movements in buying and selling!

    A lot of money will probably be made in figuring out how to lead AI traders down a path...

  • Waht could go wrong?

  • Sounds like an exceptionally dumb idea (Score:3)

    by gweihir ( 88907 ) on Friday September 08, 2023 @10:27PM (#63834140)

    Apparently market stability is not a concern though, greed is more important.

  • Hypnogogic hedge fund arbitrage of micro-dose flashbacks against future tranches of algorithmic meta-market derivatives.

    • What if prices have a context-sensitive grammar and AI can figure it out so you can do perfect hedges like it produces perfectly grammatical sentences?

  • Don't let AI anywhere near the stock market, and shoot anyone who suggests it. Read Black Swan.

  • "Flash" "Crash".

    How about this...

    They can have their AI trading bots on one condition:
    They eat any and all losses incurred. No go-backsies, no bailout. No stopping everything and rewinding the stock market to before your friend got fucked. Deal with the results of your own mistakes. They shouldn't get to gamble and only accept the result if they win. That's not gambling. That's corporate welfare, and that's utter bullshit.

    • What if no one pays for welfare (corporate or otherwise) because the Fed just prints money and automatically indexes all incomes and savings to price rises?

  • Obligatory: "What could possibly go wrong?" n2ch

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