Use AI and be more human

We’re all familiar with Algorithmic Trading: Using software programs given certain parameters and set to work on millions of pieces of real-time market data. The aim? To locate and execute trading opportunities the programs identify as falling within their criteria.

“Algos” in trading have been around for some time, dating back to the late 1990s and early 2000s as many financial markets went electronic. But for years, using these sophisticated (and if like me, you have had investments, not so sophisticated it seems) tools that help traders, has not generally been part of the Operations landscape, and in the world of regulatory reporting, even less so.

Volumes of data. Little investment.

And that makes no sense. Yes, trading can make you money and algos can gain an advantage to win a trade. But it's easy to see how Operations can cost firms money if they don’t manage the vast amounts of data needed to be processed each day, accurately and efficiently. Since 2022, the MarketAxess ARM has back reported over 2 billion transactions for firms.

The lack of general investment in Operations processes and systems over many years, means that firms rely on human power. The vast amount of data any investment firm needs to share daily—internally and externally—relies on complex, often outdated systems and procedures to monitor, instruct, control and move. From settlement to valuation, bank reconciliation to regulatory reporting, all this data is managed and processed using limited advanced technological means. Human errors result in fines, operational costs, and reputational damage.

Change is coming.

MarketAxess is investing in solutions powered by “AI” and Machine Learning to create the next generation of Post-Trade services. But what is AI and what can it do to help firms avoid expensive costs and reduce operational risk?

Computer and research scientist, Pierre-Thomas, leads the design of the next generation of MarketAxess Post-Trade solutions, called SensAI^®. “AI is all about the data, not the models!” he enthuses. “When dealing with millions of transactions per day, it becomes very hard for a human to identify all the patterns and the relationship between the different variables.”

”This is where AI has a key role to play,” Pierre-Thomas elaborates. “By finding these patterns and leveraging data at their highest potential. In SensAI, we have used our unique data to train algorithms which can detect issues in the reported transaction (RTS 22 reporting) by predicting the expected value.”

“To achieve it,” Pierre-Thomas continues, “we have spent a lot of time on feature engineering to prepare our data and build relevant attributes that will be used by the algos. This part is critical because, without the right data and the right attributes, it is impossible to get accurate predictions regardless of the algorithm used.” The only other entities with access to MarketAxess’s multi-firm data set are regulators.

Not only does MarketAxess have a uniquely large pool of data, but SensAI saves firms the trouble of hiring expert talent and the expense of constructing their own solutions. “On top of this”, Pierre-Thomas explains about the methods devised to extract value from the data, “we use gradient boosting techniques (GBM) to build our classification and regression models. We also look at what we describe as “internal factors” i.e. a client's trading behaviour and then “external factors” i.e. market conditions and conventions. The models are then able to capture these trends to make the most accurate predictions.”

Confidently powering accuracy—at scale.

SensAI uses AI to monitor and check EVERY transaction a firm reports to us in near real-time making an assessment on its accuracy. Sounds simple, but it's not.

Think of it this way. According to latest scientific estimates, over millennia the human body has developed more than 70 TRILLION cells. That is what we are made of. And those cells ALL need energy which comes from the complex process of consuming and processing food. Your brain doesn’t use Artificial Intelligence to conduct this work, it uses “intelligence” to process this vast endeavour all day, every day, throughout your life.

By using AI with SensAI, MarketAxess can help you process the vast amount of information your investment firm generates every working day. Doing this, you ensure that when it comes to your regulatory obligations, that data is being processed efficiently and accurately, without error. The result? You’ll feel confident. Which is something only humans can do.

So be more human, and use AI from MarketAxess SensAI.

To learn more about SensAI, visit our product page.