Presentation: AI Trading and Market Manipulation – Challenges for Financial Regulators

On 22 February 2023, CBFL Associate Alessio Azzutti gave a presentation on AI trading and market manipulation at AI-Cafe, a public forum organised by the European AI Alliance dedicated to all legal, technical, and economic implications that artificial intelligence (AI) presents to our societies.

A recording of his presentation can be seen in Youtube here.

Description of the talk
As in other sectors of our economy, AI has entered the financial trading scene as a real game changer. AI is proposed to deliver several benefits to capital markets, making them faster, more liquid and cost-effective, thus perhaps more efficient. Yet AI-powered trading may expose capital markets to new sources of instability and failure. In the latter regard, increasingly capable and autonomous AI trading systems and strategies threaten market integrity in unique and significant ways.

Focusing on the dark side of AI trading, this talk will address innovative and challenging questions such as: Can AI autonomously discover and perpetrate forms of market manipulation without any prior human intent? And how does existing financial regulation address the risks associated with autonomous, black-box AI? In particular, who will be held liable for damages and crimes committed by AI? How to monitor AI trading behaviour and prevent misconduct? Are financial supervisors able to detect abnormal trading activities and investigate suspected cases of AI-optimized manipulation? In other words, where do financial regulators stand on protecting market integrity in algorithm-dominated capital markets?

About the Speaker

Before joining the Centre, Alessio was a Research Associate with the ‘Law, Finance, & Technology’ programme at the Institute of Law & Economics of the University of Hamburg, where he is also pursuing his doctoral studies in Law. Previously, Alessio obtained an LL.M. in Law and Economics at Utrecht University in August 2018 and an M.Sc. in Finance and Risk Management at the University of Florence in July 2016. Thanks to his interdisciplinary academic background, Alessio can be considered a ‘hybrid’ researcher at the intersection of finance, economic law and technology studies. His current research focuses on the implications of technological innovation for banking, payments, capital markets law and crime from an interdisciplinary perspective. He is also a member of the European Banking Institute Young Researchers Group.

His profile can be found here