The head of the world’s largest securities exchange regulator says an artificially induced global financial crash is “almost unavoidable” within the next decade if the technology is left unchecked.Speaking to the London-based Financial Times newspaper on Sunday, Securities and Exchange Commission Chairman Gary Gensler blamed ramshackle "predictive analytics" models used by trading houses and brokers outside the purview of the SEC itself.“It’s frankly a hard challenge,” said Gensler. “It’s a hard financial stability issue to address because most of our regulation is about individual institutions, individual banks, individual money market funds, individual brokers. It’s just in the nature of what we do. And this is about a horizontal (matter whereby) many institutions might be relying on the same underlying base model or underlying data aggregator.” “I do think we will in the future have a financial crisis … (and) in the after action reports people will say, ‘Aha! There was either one data aggregator or one model … we’ve relied on. Maybe it’s in the mortgage market. Maybe it’s in some sector of the equity market.” .According to Business Insider magazine, Wall Street has been some of the most enthusiastic early adopters of so-called ‘generative’ AI since ChatGPT was launched last year. Even though Goldman Sachs, Deutsche Bank and Bank of America all banned employees from using Chatbot at work, others are eagerly pressing ahead.In September, Morgan Stanley launched an AI-based assistant to give research advisors speedy access to hundreds of thousands of research documents and reports. JP Morgan meanwhile, has advertised more than 3,600 AI-related jobs to develop a patented software called IndexGPT. Rival Citigroup has advertised more than 2,100 AI-related hires, followed by Deutsche Bank and BNP Paribas with 1,000 each.The software is ostensibly to pick stocks, but the exact scope is unknown. Already, so-called ‘algorithmic’ trading accounts for 65% to 75% of all the volume on North American, European and Asian stock indices.Regulators have scrambled to keep up to find ways of policing the technology but are unable to keep up with the pace of development. The EU has drafted measures in a groundbreaking law that is set to be approved by the end of this year. The US is reviewing AI to determine what, if any, areas require new regulation and what are subject to existing regulations.A Goldman Sachs’s study in April of this year suggested AI could raise global domestic product by 7%, even as it eliminates 300 million fulltime jobs. Roughly two-thirds of US occupations are exposed to some degree of automation by AI, it said.“Despite significant uncertainty around the potential for generative AI, its ability to generate content that is indistinguishable from human-created output and to break down communication barriers between humans and machines reflects a major advancement with potentially large macroeconomic effects,” Goldman Sachs economists Joseph Briggs and Devesh Kodnani wrote.
The head of the world’s largest securities exchange regulator says an artificially induced global financial crash is “almost unavoidable” within the next decade if the technology is left unchecked.Speaking to the London-based Financial Times newspaper on Sunday, Securities and Exchange Commission Chairman Gary Gensler blamed ramshackle "predictive analytics" models used by trading houses and brokers outside the purview of the SEC itself.“It’s frankly a hard challenge,” said Gensler. “It’s a hard financial stability issue to address because most of our regulation is about individual institutions, individual banks, individual money market funds, individual brokers. It’s just in the nature of what we do. And this is about a horizontal (matter whereby) many institutions might be relying on the same underlying base model or underlying data aggregator.” “I do think we will in the future have a financial crisis … (and) in the after action reports people will say, ‘Aha! There was either one data aggregator or one model … we’ve relied on. Maybe it’s in the mortgage market. Maybe it’s in some sector of the equity market.” .According to Business Insider magazine, Wall Street has been some of the most enthusiastic early adopters of so-called ‘generative’ AI since ChatGPT was launched last year. Even though Goldman Sachs, Deutsche Bank and Bank of America all banned employees from using Chatbot at work, others are eagerly pressing ahead.In September, Morgan Stanley launched an AI-based assistant to give research advisors speedy access to hundreds of thousands of research documents and reports. JP Morgan meanwhile, has advertised more than 3,600 AI-related jobs to develop a patented software called IndexGPT. Rival Citigroup has advertised more than 2,100 AI-related hires, followed by Deutsche Bank and BNP Paribas with 1,000 each.The software is ostensibly to pick stocks, but the exact scope is unknown. Already, so-called ‘algorithmic’ trading accounts for 65% to 75% of all the volume on North American, European and Asian stock indices.Regulators have scrambled to keep up to find ways of policing the technology but are unable to keep up with the pace of development. The EU has drafted measures in a groundbreaking law that is set to be approved by the end of this year. The US is reviewing AI to determine what, if any, areas require new regulation and what are subject to existing regulations.A Goldman Sachs’s study in April of this year suggested AI could raise global domestic product by 7%, even as it eliminates 300 million fulltime jobs. Roughly two-thirds of US occupations are exposed to some degree of automation by AI, it said.“Despite significant uncertainty around the potential for generative AI, its ability to generate content that is indistinguishable from human-created output and to break down communication barriers between humans and machines reflects a major advancement with potentially large macroeconomic effects,” Goldman Sachs economists Joseph Briggs and Devesh Kodnani wrote.
