SEC is Worried Chatbots Could Fuel a Market Panic (theverge.com) 36
The US Securities and Exchange Commission (SEC) has expressed concern about generative AI's impact on financial markets. From a report: In a speech given to the National Press Club on Monday, SEC Chair Gary Gensler said recent advances in generative AI increase the possibility of institutions relying on the same subset of information to make decisions. Gensler said the large demand for data and computing power could mean only a few tech platforms may dominate the field, narrowing the field of AI models companies can use.
[...] He said: "AI may heighten financial fragility as it could promote herding with individual actors making similar decisions because they are getting the same signal from a base model or data aggregator," Gensler said. He added that the rise of generative AI and other deep-learning models "could exacerbate the inherent network interconnectedness of the global financial system."
[...] He said: "AI may heighten financial fragility as it could promote herding with individual actors making similar decisions because they are getting the same signal from a base model or data aggregator," Gensler said. He added that the rise of generative AI and other deep-learning models "could exacerbate the inherent network interconnectedness of the global financial system."
Or (Score:3)
Or maybe it'll just increase the value of novel sources of market analysis while reducing the value of Ai-generated claptrap.
The Market is a child (Score:2, Troll)
Seriously. "The market" is as dumb as a fucking brick. It's insane that we even allow "The Market" to affect our economy. It's like a bunch of mentally stunted children buying and selling things with other people's money, and they are easily spooked and easily led. Why we keep making laws to protect the emotional and intellectual deficiencies of "The Market", rather than, I dunno, making this gaggle of morons with deep pockets less powerful, is beyond me.
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Instead of do-overs and 'circuit breakers', let the idiots that run around like chickens on meth fail hard. Insert a mandatory latency into the market to back off of the hair triggers. Enforce the drug laws on wall street at least as well as they are enforced elsewhere so we don't have traders getting paranoid on coke. Make the commodities market physical delivery only.
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Most futures contracts, e.g. Oil, Gold, NatGas, T-Bills, etc. are already physical delivery contracts. Cash settled contracts are the exceptions, and are things like the E-Minis and micros for e.g. the S&P 500/Nasdaq, etc. Is the goal to squash speculative contracts like the latter?
(I'm with you on mandatory latency in the market. I don't see any meaningful benefit from HFTs "price discovery" mechanism. It's purely parasitic IMHO.)
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The goal is absolutely to squash speculative contracts.
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This is in no way free capitalism. This is interventionist, protectionist, "you gamble with other peoples money, I will save you when you are in trouble"-ism. The stark opposite of capitalism. Let them play with their own money and when they fail, let them fail hard. There was no need for the govt. to go buttery soft on the wall-street bankers after they caused the 2008 disaster. Some of them should have landed in jails. Many of those banks should have failed. Printing money ("quantative easing") to buy tox
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Seriously. "The market" is as dumb as a fucking brick. It's insane that we even allow "The Market" to affect our economy. It's like a bunch of mentally stunted children buying and selling things with other people's money, and they are easily spooked and easily led. Why we keep making laws to protect the emotional and intellectual deficiencies of "The Market", rather than, I dunno, making this gaggle of morons with deep pockets less powerful, is beyond me.
The market is simply a collection of publicly traded companies.
We could eliminate the market by eliminating publicly traded companies, but then that means only the wealthy and financially sophisticated get the opportunity to have ownership in companies, and wealth inequality becomes even worse.
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"The Market" is you. And everyone else.
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Plus the rules and the fall back gaurantees provided by the fed and SEC.
Similar incident a decade ago, pre-ChatGPT (Score:5, Informative)
A stringer for Bloomberg picked up December 2002 article where the date had been dropped off the online version, and so added today's date and republished it as news. Other automated trading platforms triggered sell orders for UAL based on the false impression that this was a new event.
Imagine how much more impressive mistakes can be when produced by generative AI and without a human in the loop!
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I don't understand what was the problem here. Some trigger happy day traders acting on news feeds in the hope of making quick and easy money might have lost money that day and some others might have made money that day. Overall I think it was a zero-sum game. No need to regulate anything here. Just sit and watch the show.
Sell, sell, sell! (Score:2)
Investors have been using AI for years (Score:2)
Investment firms have been using AI systems for years, to predict market movements and make investment decisions. I'm not sure how chatbots will cause much of an impact, since they are bad at math--a factor that is kind of important for investments. Math-focused AIs are actually easier to build than language models, so their use has become pretty widespread.
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Chatbots also don't have a feedback loop. They generate stuff that is consumed by the user's mind, and then what?
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Well, I don't know where it will go, but I'm betting that a language model will never be very good at math or finances. For that, you need a mathematical model.
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How is a trigger happy trader clicking the buy/sell button hundred times a day a "Mathematical model"? SEC seems to be worried about these "investors".
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They're called high-frequency traders, which rely entirely on mathematical models. https://en.wikipedia.org/wiki/... [wikipedia.org]
And the low-end variant you describe, where a person clicks a button only a hundred times a day (instead of hundreds of times a minute) is also relying on mathematical models, plus the random element of human intuition.
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The "low-end variant" traders make money too and Wall street still employs them. My point is, you don't need mathematical models to make money in the market. I don't think Peter Lynch or Warren Buffet or John Bogle or G Soros and a horde of others are good at building 'Mathematical Models' but they made money. And HFT is not so much Math intensive per se. Not the kind of math involving yield curve models, volatility models, statistical arbitrage models etc. It's simpler algorithms but powered by technology
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I'm not saying you have to have mathematical models to make money on Wall Street. But I am saying that a language model definitely won't help you.
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They were TRAINED with a feedback loop but they do not operate with a feedback loop. When they produce output, the system has no way to measure if what has been produced is close to or far from a goal and adapt accordingly.
Given that the "loop" ends in the user's mind, chatbots are primarily entertainment.
SEC is Worried Chatbots won't care about politics, (Score:1)
The blind leading the blind (Score:5, Interesting)
And now SEC is worried that the blind would follow an AI guide dog instead. Could it be any worse?
How could you tell if the blind leading the pack isn't already following an AI guide dog right now? All these "analyst" could have been using AI to generate their reports for the last decade for all we know.
The solution to chatbots... (Score:2)
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Yo Ho Ho (Score:2)
Bank of America's going belly up!
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The Market .... (Score:2)
..is people who have billions buying and selling things they have no interest in, or even things they don't exist, or things that are a bet on a change in the Market ....
It's so far removed from reality, and they are so buffered from the consequences it could be ignored except for the fact hey are mostly gambling with our money ...
"Could"? (Score:2)
Don't you mean "will"?
To paraphrase the Batman, stock traders are a superstitious and cowardly lot.