How We Do It: Electronic Trading & Technology

The Electronic Trading & Technology (ETTC) examines areas where technology impacts wholesale markets, creating opportunities and challenges. Recent key areas of work include issuing a Statement of Good Practice to help firms apply model risk management frameworks in a proportionate manner to models deployed in electronic trading algorithms. Current areas of work include exploring market-facing applications of AI.

“I’m delighted to be chairing FMSB’s Electronic Trading and Technology Committee. The Committee’s recent publication on the application of AI in wholesale markets illustrates just how valuable FMSB is as a forum for convening experts from across markets to share their perspectives on complex areas of wholesale market activity and the common challenges we face. Technological innovation in markets presents significant opportunities, but ensuring human oversight, strong controls, and clear accountability will be essential to sustaining fair and effective markets as the use of these technologies continues to evolve. I look forward to progressing the Committee’s work on AI in areas such as the application of model risk management frameworks to electronic trading algorithms, among others.”

Asita Anche, Chair of the Electronic Trading & Technology Committee and Head of Systematic Market Making, Risk Centralization & Data Science at Barclays

Work in Progress

Market-facing applications of AI

As highlighted in the Future of financial markets report, AI is increasingly being adopted in trading and execution activities. As market participants explore such market-facing applications, the risks associated with such use cases will differ from internal applications. Furthermore, broad definitions of AI potentially capture both traditional machine learning techniques used in e-trading, as well as novel generative AI and natural language processing applications.
The focus of the Working Group is on market-facing AI applications in wholesale markets, distinguishing between more traditional and novel use cases, the potential risks these pose to firms, clients and markets as well as how firms may think about mitigating such risks.

Topics under consideration

Application of model risk management frameworks to electronic trading algorithms

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