ESMA: Technology is transforming capital markets
21 September 2018 Paris
Image: Shutterstock
Technology is transforming capital markets, according Steven Maijoor, chairman of the European Securities and Markets Authority (ESMA).
The huge importance of the topic stems from two simple observations: first, technological advances are profound, and are happening now. Second, capital markets have a great impact on prosperity and society. Technological change in capital markets is therefore likely to have major consequences, Maijoor said.
“As a regulator, it is my job to ensure investor protection, market integrity and financial stability,” he added.
Maijoor expressed optimism that technology has the potential to make capital markets work better but added that there are risks, too.
Maijoor warned that it is important not to get carried away, pointing out while there is often a lot of hype around technology, much is speculative or premature.
Instead of getting lost in the hype surrounding the future, we can still marvel at the technologies we already use.
Maijoor stated: “This democratisation of information would have been unimaginable a generation ago.”
“However, this also brings risks. A single tweet can move markets. So it is vital to be able to interrogate information. Who is responsible for checking the facts you hear? Who is the gatekeeper of the stories you read? Has a tweet by a CEO the same value as a line in a press release?”
With the technological revolution taking place all around us, what could it have in store for securities markets and for investors, he asked, pointing to automated advice as part of his answer.
Another way in which technology could affect capital markets and investors is via artificial intelligence (AI)-powered investment and trade execution strategies.
AI and machine learning tools are being used by portfolio managers to detect subtle patterns in data to help predict price movements.
“Now that I am a regulator, one of the goals of my work is to ensure the integrity of markets,” he said.
“Regulators have for example been exploring how best to put in place data analytics and pattern recognition systems to study trading behaviour to detect market abuse. I see significant potential in this area”, he concluded.
He finished on a pragmatic-sounding note. “Regulators face a balancing act,” he stated in the conclusion to his speech.
“We work to understand and respond to the risks that new technologies and entrants may introduce while at the same time not wanting to stifle innovation by restricting the use of certain technologies.”
He concluded: “When making this assessment, I think it is important to keep in the back of our minds that common capital markets phenomena like a derivative, a mutual fund, and even a stock exchange, once came to life as a financial innovation.”
The huge importance of the topic stems from two simple observations: first, technological advances are profound, and are happening now. Second, capital markets have a great impact on prosperity and society. Technological change in capital markets is therefore likely to have major consequences, Maijoor said.
“As a regulator, it is my job to ensure investor protection, market integrity and financial stability,” he added.
Maijoor expressed optimism that technology has the potential to make capital markets work better but added that there are risks, too.
Maijoor warned that it is important not to get carried away, pointing out while there is often a lot of hype around technology, much is speculative or premature.
Instead of getting lost in the hype surrounding the future, we can still marvel at the technologies we already use.
Maijoor stated: “This democratisation of information would have been unimaginable a generation ago.”
“However, this also brings risks. A single tweet can move markets. So it is vital to be able to interrogate information. Who is responsible for checking the facts you hear? Who is the gatekeeper of the stories you read? Has a tweet by a CEO the same value as a line in a press release?”
With the technological revolution taking place all around us, what could it have in store for securities markets and for investors, he asked, pointing to automated advice as part of his answer.
Another way in which technology could affect capital markets and investors is via artificial intelligence (AI)-powered investment and trade execution strategies.
AI and machine learning tools are being used by portfolio managers to detect subtle patterns in data to help predict price movements.
“Now that I am a regulator, one of the goals of my work is to ensure the integrity of markets,” he said.
“Regulators have for example been exploring how best to put in place data analytics and pattern recognition systems to study trading behaviour to detect market abuse. I see significant potential in this area”, he concluded.
He finished on a pragmatic-sounding note. “Regulators face a balancing act,” he stated in the conclusion to his speech.
“We work to understand and respond to the risks that new technologies and entrants may introduce while at the same time not wanting to stifle innovation by restricting the use of certain technologies.”
He concluded: “When making this assessment, I think it is important to keep in the back of our minds that common capital markets phenomena like a derivative, a mutual fund, and even a stock exchange, once came to life as a financial innovation.”
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
