Impact of Artificial Intelligence on Trading Platforms in Financial Markets
Prime Minister's OfficeSpeakers
Summary
This question concerns Dr Tan Wu Meng’s inquiry into the risks of herding and potential conflicts of interest arising from the use of artificial intelligence (AI) on financial trading platforms. Deputy Prime Minister Lawrence Wong responded that the Monetary Authority of Singapore (MAS) requires financial institutions (FIs) to implement technology-neutral controls that mitigate conflicts and ensure customers are treated fairly. He highlighted the 2018 Fairness, Ethics, Accountability and Transparency (FEAT) Principles and a framework developed with the industry to help FIs evaluate their AI systems against these standards. While the risk of herding is currently assessed as low due to the nascent stage of AI adoption, MAS continues to monitor potential market risks closely. MAS remains committed to engaging the industry to facilitate transparent disclosures and ensure the responsible use of AI and data analytics in the financial sector.
Transcript
2 Dr Tan Wu Meng asked the Prime Minister whether MAS has assessed the impact of artificial intelligence (AI) on trading platforms in financial markets for (i) the risk of "herding" where individual actors make similar decisions due to similar trained AI models or similar data aggregates and (ii) the potential for conflict of interest when a trading AI platform system is simultaneously considering both the platform's interest and the customers' interests, especially if without disclosure to customers.
Mr Lawrence Wong (for the Prime Minister): The Monetary Authority of Singapore (MAS) requires regulated financial institutions (FIs) to have controls in place to avoid or mitigate conflicts between their interests and those of their customers. This approach is technology-neutral and is applied across all regulated FIs.
As early as 2018, MAS introduced the Fairness, Ethics, Accountability and Transparency (FEAT) Principles to guide FIs’ responsible use of artificial intelligence and data analytics (AIDA) in their products and services. Amongst other things, these principles require FIs to ensure that AIDA adoption does not result in customers being treated less fairly than the business. FIs are also required to provide customers transparent disclosures on the FIs' products and services, to facilitate informed decision-making.
The risk of herding in trading platforms arising from the use of artificial intelligence (AI) models is currently assessed to be low as FIs in Singapore are still at a nascent stage of using AI models for decision-making. Nevertheless, MAS continues to carefully monitor and assess the risks brought about by AI in financial markets. In recent years, MAS has worked with the industry to develop a framework which enables FIs to evaluate their AI systems against the FEAT Principles. MAS will continue to engage the industry on the responsible use of AI in finance.