A key investor behind an artificial intelligence platform for the trading floor says it has the potential to rebuild public trust in financial markets as it incorporates blockchain technology.
Steve Compton (pictured below) formerly worked as a managing director in the global markets division at Citigroup and has 26 years of trading experience.
He is now advising London-based FinTech start-up AiX, which claims its AI engine can reduce commission rates by up to 95 per cent by replacing inter-dealer brokers.
“People get nervous when they think about artificial intelligence trading markets starting to buy and sell things,” he told BusinessCloud.
“With AiX we’re not doing that: we’re finding AI solutions to intermediate trades between human beings [and] operate on their instructions faster, more cheaply, more accurately and more transparently.
“This could be part of rebuilding trust in financial markets by ensuring that negotiations of trades through our platform are completely transparent, auditable and watertight.”
When human traders communicate via chat messages or the phone, the platform processes what they type or say in real time and sends a response which Compton says is “optimised around the rules in place, the instructions given and the data being analysed in the marketplace”. All data and decisions used to make a trade are written on to the blockchain.
AiX, which has received $16 million in private investments to date, has a prototype “up and running” and hopes to launch into commodities options markets in the coming months. He says the response from traders has been positive.
“There’s no plan to replace traders at banks with AI in our vision. We’re simply performing that intermediary role,” he said.
“Markets have evolved and will continue to evolve. When government bond trading moved on to electronic platforms, those brokers needed to reinvent themselves – or move to a different market.
“It is true that AI can do a better job with fewer humans operating within the model, but that’s just one narrow area of financial markets, which is itself just one part of the economy.
“The benefits for the overall economy are substantially greater than the costs of certain jobs for a particular profession.”
AiX could also bridge the worlds of blockchain and cryptocurrencies over to the traditional financial markets after the recent implementation of Bitcoin futures.
“Ultimately the plan is to continue to grow into every market where voice broking today is prevalent,” said Compton.
“The success of the new platform does not depend upon trading cryptocurrencies but both the retail market and large banks are paying enormous attention to the rapid growth of cryptocurrencies and spending money to understand those markets and potentially to trade them.
“Our platform will be able to accommodate and facilitate that trading.”
Jos Evans, founder and CEO of AiX, has previously said inter-dealer brokers are “expensive… a hangover from the 1980s”.