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‘Human, Please Look at This’: Nasdaq Using AI to Spot Abuses

Certain things make Valerie Bannert-Thurner raise an eyebrow when looking for signs of bad behavior on the Nasdaq exchange. Gloating in the chatrooms, for example.

“I like the example of excessive cheering because the guys just can’t help themselves but cheer,” said Bannert-Thurner, who is senior vice president and head of risk and surveillance at Nasdaq.

Another worrisome indicator is seemingly too-good-to-be-true trading profits.

“If people are excessively profitable given how they trade and in comparison to everybody else trading the same instruments with similar styles, then we ask, is this luck or something else?” Bannert-Thurner said. “You just can’t outperform the market all the time.”

But with 14 million trades a day on Nasdaq and innumerable chats and emails, she and her colleagues can’t look at everything. Enter artificial intelligence.

This year, the exchange began using AI to help it detect market abuse. Bank clients of Nasdaq and its artificial intelligence partner, Digital Reasoning, are also starting to use the technology — UBS is one.

It’s another place artificial intelligence is changing work in financial services, along with virtual assistantsback office operationslending decisionsauthenticationcompliancedetecting cybercrimefinding fraud, and any place there’s simple paperwork that could easily be automated.

According to independent market expert Anshuman Jaswal, who until recently was a capital markets analyst at Celent, Nasdaq is one of the first exchanges to use AI.

“This is an emerging trend, but not all leading exchanges and vendors have the same capabilities,” he said.

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