Emerging Technology Discussed at the TSX Equities Trading Conference

Wednesday May 17, 2017 was the annual TSX Equities Trading Conference. SWI was once again a proud sponsor of the event, and even had some of our employees on stage to help with the Toronto Stock Exchange open that day.

Following the hype of the market open was a day packed with interesting panels in which experts with a variety of perspectives discussed some of the issues and opportunities in equity trading today. Themes ranged from regulations to market structure to upcoming technologies, and the moderators did an excellent job of keeping the discussions on topic and ensuring each panelist could share their unique point of view.

Of particular interest to me was the panel on emerging technology. It focused primarily on artificial intelligence/machine learning and blockchains. While the recent compliance conference highlighted interest in “data driven regulation”, one panelist still lamented the hesitation of regulators to accept the usage of machine learning (ML) algorithms due to the lack of transparency into what the machine actually learns. Since trained ML models cannot always be easily translated into human-understandable logic, it is sometimes impossible to know how exactly the algorithm makes the decisions it does. Moreover, with concerns about unknown human biases entering into ML models, not having explicit assumptions and rules for the decision-making leaves regulators uncomfortable for the time being.

As for blockchain technology, all but one panelist seemed to believe it will inevitably be integrated into trading transactions in the future. Although they all agreed that it will take a long time to happen because of the resistance to change in industries with a large amount of existing infrastructure (as a result of the cost associated with changing all the existing infrastructure). An additional road block to its adoption is the fact that blockchain technology is a network-based design, so some minimum number of institutions would all need to implement it at the same time for it to make sense.

Overall, the one thread, which was consistent throughout all the panels, was that now is a time filled with difficult and interesting problems in equity trading for new talent to solve.

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