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.

“As asset managers, we particularly appreciate FMSB’s efforts to convene market practitioners and strive for the highest standards of conduct for the global wholesale financial markets. Specifically, we recognise the value in identifying focus areas of best market practices such as the Electronic Trading and Technology Committee’s recently published work on model risk management. With the growth of electronic trading, this work can help support firms in applying their existing model risk frameworks in a proportionate way to electronic trading algorithms.”

Daniel Mayston, former Chair of the FMSB Electronic Trading & Technology Committee

Work in Progress

Market-facing applications of AI

AI use cases to date in financial services have typically focused on internal productivity and efficiency gains. However, as market participants begin to explore market-facing applications, the risks associated with such use cases will differ from internal applications. Furthermore, the current broad definitions of AI capture both traditional machine learning techniques used in e-trading, as well as novel generative AI and natural language processing applications. The focus of this 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

Electronic / auto pre-hedging

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