With advisors and broker-dealers growing their use of artificial intelligence, sparking warnings about transparency from the SEC, what about its use in other parts of the investment ecosystem?
A new report highlights increasing usage and interest in AI from buy-side equity trading desks with asset managers seeing the potential for improved performance and productivity through high-speed technology in their processes.
The Crisil Coalition Greenwich study asked North American buy-side traders about how they use AI and found 15% already incorporate internal AI tech into their trade execution workflow, while a further quarter plan to do so within the next 12 months.
Most respondents (80%) say that algorithm optimization will have significant impact from AI.
“Optimizing trading algorithms in real time is the holy grail of AI for buy-side traders,” says Jesse Forster, Senior Analyst at Crisil Coalition Greenwich Market Structure & Technology and author of Great expectations for AI in equity trading. “But is also risky proposition requiring a significant investment of time and money, and one that only a handful of firms are equipped to handle.”
However, the benefits also include processing post-trade transactional cost analysis and 60% of study participants believe AI will have a meaningful influence in venue selection, and half expect AI to have a sizable impact on broker and strategy choices.
But while investment and time is required to ensure implementation of AI within trading desks it done to the optimum level, especially given a lack of quality data, firms may not see the ROI that investors expect.
“However, with careful planning, investment and collaboration, we believe that AI can play a transformative role in equity trading execution, enabling buy-side traders to make more informed decisions and achieve better outcomes,” concludes Forster.
InvestmentNews recently spoke with Mark Trousdale, chief growth officer at Communify Fincentric, a firm started by former InvestCloud leaders and now working with over 90% of leading online brokers in the US, about the ‘game-changing potential’ of deterministic AI.
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