Nasdaq Launches Artificial Intelligence for Surveillance Patterns on U.S. Stock Market
November 07 2019 - 08:00AM
Nasdaq, Inc. today announced the successful go-live of artificial
intelligence for surveillance patterns on The Nasdaq Stock Market,
the world’s largest stock exchange by volume traded.
Developed as a collaboration between Nasdaq’s Market Technology
business, its Machine Intelligence Lab and the company’s U.S.
market surveillance unit, the initiative enhances Nasdaq’s market
surveillance functionality with artificial intelligence and
transfer learning to improve detection of malicious activity.
Currently, Nasdaq’s U.S. market surveillance team annually reviews
750,000+ alerts that flag unusual price movements, trading errors
and potential manipulation.
The new technology, which is currently patent pending with the
U.S. Patent and Trademark Office, provides Nasdaq with unique
artificial intelligence capabilities for market surveillance
including:
- Deep Learning –allows computers to understand extremely complex
patterns and hidden relationships in massive amounts of data
- learns invariant representations
- uses 'hidden layer' in find increasingly complex
relationships
- can learn any function, including highly non-linear
ones
- Transfer Learning – creates new models from old models
- rapid implementation
- scalable model development
- detect new forms of financial crime in new markets
- Human-in-the-Loop Learning – allows analysts to share their
expertise with the machine efficiently, allowing them to focus on
investigation and evidence curation
- man-machine integration
- label generation on-the-fly for sparse or unclear classes
- human assisted model improvement leads to more signal and less
noise in flagged examples
Nasdaq
plans to expand the technology to other exchanges and regulators
worldwide via the Market Technology business, as well as to other
Nasdaq markets. The company will also extend the range of scenarios
the system detects.
“Working closely with our U.S. surveillance team, we are able to
train our models based on their experience in monitoring data
directly from the trading engine of the world’s most liquid and
dynamic market,” said Tony Sio, Vice President and Head of
Marketplace Regulatory Technology, Nasdaq. “Through transfer
learning, we have now built a framework to provide those learnings
to other marketplaces around the world. We believe this is a major
step in the evolution of how we use artificial intelligence
technology to maintain the integrity of capital markets.”
In Nasdaq’s recent annual study of market surveillance of the
global capital markets, firms emphasized recent investments in
artificial intelligence/machine learning (AI/ML) capabilities,
ostensibly hoping such innovations will help reduce false positives
in trade surveillance by improving the efficacy of alerts. The
survey revealed investments in this technology rose dramatically:
42% of respondents report they recently invested in AI/MI, and 65%
plan to invest in it over the next 12 to 24 months.
“The U.S. capital markets are the largest, most liquid financial
ecosystem in the world and protecting our markets for retail and
institutional investors alike is an important responsibility,” said
Martina Rejsjo, Vice President and Head of Market Surveillance,
North America Equities, Nasdaq. “This means constantly evolving how
we adopt and leverage new technologies to better surveil trading
activity. By incorporating AI into our monitoring systems, we are
sharpening our detection capabilities and broadening our view of
market activity to safeguard the integrity of our country’s
markets.”
“Artificial intelligence and machine learning have broad
application across our company – from predicting market trends with
Nasdaq’s proprietary data or creating more sophisticated market
surveillance capabilities,” said Michael O’Rourke, Senior Vice
President, Head of Machine Intelligence, Nasdaq. “We want to make
every one of Nasdaq's businesses better and smarter by providing
them with richer data and more context-specific information. AI is
going to play a crucial role in building the next generation of
technologies for not only the capital markets, but every
industry.”
As the industry benchmark for real-time and T+1 cross-market
surveillance platforms, Nasdaq’s surveillance technology automates
the detection, investigation and analysis of potentially abusive or
disorderly trading. The technology is built to improve the overall
efficiency of the surveillance organization and reduce cost, even
as market complexity and new regulations increase. These solutions
are used to power monitoring for more than 59 marketplaces, 19
regulators and 160+ market participants, including several buy-side
institutions, across 65 countries.
About Nasdaq
Nasdaq (Nasdaq: NDAQ) is a global technology company serving the
capital markets and other industries. Our diverse offering of data,
analytics, software and services enables clients to optimize and
execute their business vision with confidence. To learn more about
the company, technology solutions and career opportunities, visit
us on LinkedIn, on Twitter @Nasdaq, or at www.nasdaq.com.
Media Contacts
Ryan WellsMobile: +1 646 648 3887ryan.wells@nasdaq.com
Yan-yan Tong Mobile: +46 (0)73 449 66 83
yan-yan.tong@nasdaq.com
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