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Regulators use Silicon Valley's AI to catch rogue traders - FT.com

#artificialintelligence

Trader Navinder Singh Sarao, who is resisting market manipulation charges, at Westminster Magistrates' Court In Robert Harris's 2011 novel The Fear Index a secretive hedge fund builds a computer capable of making its own trading decisions. Gobbling up information, the machine starts to confuse its human creators by building huge stakes and making a handsome profit from a market panic. As they assess the outcome, one of the protagonists notes: "The beauty of it is that it was but 0.4 per cent of total market volatility. No one will ever notice, except us." As markets increasingly rely on computer algorithms, reality is imitating fiction: artificial intelligence is becoming a bigger part of investing and it is also helping regulators ensure that traders do not get away with bad behaviour.


Meet Wall Street's New AI Sheriffs

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Inc.'s 11th annual 30 Under 30 list features the young founders taking on some of the world's biggest challenges. In 2013, a high-frequency trader named Michael Coscia was arrested in New Jersey for an activity called "spoofing"--essentially manipulating the market by flooding trading systems with future orders he had no intention of completing. He was fined 6 million--with the possibility of jail time. It was the first such prosecution under a new set of financial regulations from the 2010 banking reform law called the Dodd-Frank Act. That was an aha! moment for David Widerhorn, 28, and it became his reason for founding Neurensic.


Meet Wall Street's New A.I. Sheriffs

#artificialintelligence

Inc.'s 11th annual 30 Under 30 list features the young founders taking on some of the world's biggest challenges. In 2013, a high-frequency trader named Michael Coscia was arrested in New Jersey for an activity called "spoofing"--essentially manipulating the market by flooding trading systems with future orders he had no intention of completing. He was fined 6 million--with the possibility of jail time. It was the first such prosecution under a new set of financial regulations from the 2010 banking reform law called the Dodd-Frank Act. That was an aha! moment for David Widerhorn, 28, and it became his reason for founding Neurensic.


Spoofing Settlements Highlight the Foibles of Trader-Surveillance Tools

WSJ.com: WSJD - Technology

The spate of corporate resolutions are the result of long-running investigations by the U.S. Commodity Futures Trading Commission, the U.S. Justice Department and other agencies into spoofing of the precious-metals and Treasury markets. Spoofing involves sending large orders to exchanges which traders intend to cancel, creating a false sense of supply and demand that benefits the trader's other, smaller orders. The recent settlements require the banks to strengthen their anti-spoofing compliance programs. Pushing companies to become increasingly sophisticated about compliance has been a growing emphasis of the Justice Department and regulators. Our Morning Risk Report features insights and news on governance, risk and compliance.


Neurensic Releases Cloud-Based AI Surveillance Solution for Trading Industry Finance Magnates

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Neurensic, a Chicago-based regtech artificial intelligence (AI) startup, has announced the release of its new SCORE surveillance platform, the trading industry's first compliance solution powered by a cloud-based machine learning architecture which is able to identify complex patterns of trading behavior on a massive scale, across multiple markets in near real time. The FM London Summit is almost here. The development of the new SCORE platform was led by David Widerhorn and Neurensic's CTO, Dr Cliff Click, the inventor of the H2O artificial intelligence framework, the world's fastest distributed machine learning architecture. SCORE combines high-speed, big data processing power with self-adaptive pattern recognition technology, providing firms with a continuous assessment of the compliance risk associated with complex trading behaviours. The firm's recently completed beta release provided clients with surveillance technology for regulators, proprietary trading firms and futures commission merchants, culminating in engagements with larger institutional customers, including broker-dealers and global banks.