Technology could make markets more volatile through ‘herding behaviour’, Sarah Breeden tells ECB conference
The rapid advancement of AI in financial applications, particularly high-frequency trading, necessitates a proactive regulatory stance to manage systemic risks.
This highlights growing concerns among central banks regarding AI's potential to destabilize financial markets, suggesting future regulations that could impact technological innovation and market structures.
Regulators are actively considering preemptive measures like 'kill switches' for AI trading, indicating a shift from reactive to proactive governance in financial technology.
- · Financial regulators
- · Cybersecurity firms
- · Risk management software providers
- · AI-powered trading firms
- · High-frequency trading firms
- · Unregulated AI developers
Central banks will likely accelerate research and policy development for AI in financial markets.
This could lead to new compliance burdens for firms utilizing AI in trading, potentially slowing adoption for some applications.
The concept of 'kill switches' might extend to other critical AI applications, setting a precedent for broader AI governance frameworks.
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Read at Financial Times — Technology