+44 (0)20 7048 9400
  Email Us
  Client login
       

There is no doubt that Financial Technology (FinTech) will play a more prominent role in financial markets in the future. Investment in this area has reached record levels, and many believe this is only the start of the revolution. As a wise person recently said:-

“Data is the new oil”

However, there are concerns that the use of Artificial Intelligence (AI) could be to the detriment of execution-only traders.
 

Artificial intelligence

AI is not a new phenomenon in the world of finance, with algorithmic trade execution services a regulatory challenge in years gone by. While regulations have emerged that control this type of trading, to a certain extent, the new wave of FinTech services is much more powerful. In recent years, AI has come on in leaps and bounds, learning market trends and technical indicators and forecasting price movements based on ever-changing order book numbers and trading patterns.

Comparing basic execution-only trading to the FinTech AI services available today is akin to night and day.
 

Regulatory developments

In a similar fashion to the early days of the cryptocurrency market, much of the initial FinTech development went unnoticed by regulators. It was only when FinTech services reached a scale where they could potentially disrupt markets that they caught the eye of regulators such as the FCA. We already know that the FCA is planning to investigate the influence of big tech companies in the financial services industry. What they find may surprise many people, and we await the report with anticipation!

 

Automated trade execution

Automated trade execution based on algorithms and preset criteria, akin to technical trading, has often been described as a self-fulfilling prophecy. For example, when one stop-loss limit kicks in, this can often lead to a domino effect as other automated trading algorithms kick in. While this may be true to a certain extent, it is safe to say FinTech has also prompted improvements in trading technology to the benefit of short-term/day traders.

 

The trend is your friend

While some suggest that automated trading, using ever more powerful FinTech, simply condenses traditional market movements, the jury is out. We know that execution-only short-term traders can also jump on the FinTech AI bandwagon and follow these trends. They will still create the same overbought and oversold situations, prompting human investors to become involved. There is a consensus that AI-based trading will never fully replicate the human mind, but is this such a bad thing?

Should stocks be valued on pure facts and figures instead of facts, figures and sentiment?

 

Low latency execution-only services

On the flip side of the coin, execution-only short-term traders have benefited from the ongoing development of FinTech services. Low latency execution only services have improved dramatically in recent years, allowing almost instant trading, which is particularly useful in fast-moving markets. 

While much of the focus on FinTech has been at the more visible end of the market, this is a technology proving extremely useful in areas such as accounting, safe custody, market settlement and money-laundering checks. Global Investment Strategy Limited is constantly investing in new FinTech, both front and backend services.

When the recently FCA announced policy targets for the next few years, there was a particular focus on data mining and the use of FinTech services. When the FCA recognises new groundbreaking FinTech capabilities, is this the ultimate recognition?

 

Conclusion

While there is no doubt that FinTech services, in conjunction with AI technology, can move markets, they also have a significant role to play in the back office and on the regulatory side. However, we will see specific regulations targeting FinTech and the influence of big technology companies in the future. Data may be the new oil, but FinTech is fast becoming the ultimate way to mine and manipulate this information. Regulators will need to remain ahead of the curve the control this AI field phenomenon!
 

Back to News