Artificial Intelligence Trading – Assault On Financial Sector: AI Is Beating Many Stock Pickers

 

 

The article was written by Aline Rzetelna, a Financial Analyst at I Know First

Artificial Intelligence Trading

 Summary:

  • Artificial Intelligence and the Financial Sector
  • IBM’s Watson Supercomputer
  • BlackRock Landing On Artificial Intelligence
  • UBS AG Implementing Artificial Intelligence Solutions
  • JPMorgan Deploys Mosaic Smart Data For Fixed Income Trading Business
  • I Know First Artificial Intelligence Algorithm

Artificial Intelligence In The Financial Sector

Everyday, Artificial Intelligence (AI) is acquiring a larger space in the world. AI is the way in which computers can simulate human intelligence and act according to data, the computer’s version of life experience. As a result, Machine Learning is leading to the AI effect, which is being seen more frequently. Tasks that were previously done by humans are now being replaced by increasingly capable computers and smart machines.

Because AI allows people to make faster, better and cheaper decisions, the financial sector (FS) is also adhering to it. The way that Machine Learning can accurately identify patterns and the vast amount of data available in this field is allowing the FS to be assisted by algorithms.

Therefore, the stock market exchange has also been reached by machines and Artificial Intelligence. The use of AI to manage investments is becoming more common than ever before. Automated trading allows traders to establish rules for trade entries and exits that can be simply and automatically executed by computers. The process remains as computers monitor markets to find the best investment opportunities.

This alternative algorithm-driven method of investing is beating many human stock pickers. Thus, thanks to advances in big data, cloud computing and faster processing speeds, many firms are getting into this new era of AI in the financial sector. To give a few examples: IBM’s Watson supercomputer has been hired to help in stock-picking for a new ETF; the world’s largest money manager, BlackRock, decided to shift its human fund managers to an automated trading pattern, which allowed them to beat indexes much more consistently than before. The Swiss Bank, UBS AG, is implementing AI solutions, utilizing robots to optimize trading strategies. Large institutions, such as Goldman Sachs and JPMorgan are also bringing AI to the trading floor.

Moreover, according to market consultancy Greenwich Associates, three-quarters of banks and financial services companies will be leveraging AI in their business in the next 12 months and almost one-in-five have already implemented this technology.

IBM’s Watson Supercomputer

The ability to successfully and consistently predict the stock market is a gold mine for the Financial Sector. The sophisticated Artificial Intelligence algorithm based trading systems allows investors to benefit with higher investment growth rate, total account transparency, exceptional liquidity, and much more. The greater efficiency provided by the algorithm is indeed transforming the finance industry.

Recently, the IBM’s Watson supercomputer has been hired to help in stock-picking for a new ETF. Called the Equbot with Watson AI Total US ETF, this new AI software helps to run an ETF and to select stocks than can achieve better performance than the broad U.S. stock market index. In its first few days of trading, the fund has gained 0.7%, beating the 0.5% of the S&P 500.

Developed by Equbot LLC, a technology-based company that utilizes AI to make investment analyses, with Watson, the Watson ETF’s approach to picking stocks utilizes a quantitative based model called Equbot. They will use IBM’s Watson AI to perform fundamental analysis, such as profit growth and valuations, based on a 10 year historical data background.

This technology uses AI to pick stocks in much the same way humans have been doing for decades. Moreover, it can process over one million pieces of information a day and then it select 30 to 70 stocks to own based on their probability of benefiting from current economic conditions, trends and world events. According to EquBot CEO and founder, Chida Khatua, the EquBot AI Technology with Watson has the ability to mimic an army of equity research analysts working around the clock, 365 days a year, while removing human error and bias from the process. Consequently, human managers are losing their importance in the financial market since automated trading can provide cheaper and more consistent results.

Utilizing Machine Learning lowers the cost to manage funds and is beating many human stock pickers in recent years. Aside from its threat to jobs, Watson has made some incredible technological breakthroughs, which is proving that AI is here to stay.

BlackRock Landing On Artificial Intelligence

At the world’s largest fund company, BlackRock, machines are rising over managers to pick stocks. Since its foundation in 1988, BlackRock has gathered over $5 trillion assets under management. The world’s biggest money manager is also landing on the new era of Artificial Intelligence.

BlackRock announced that it is reorganizing its actively managed equity business, cutting over 40 jobs. The new strategy is focusing on the replacement of the human portfolio managers to computerized stock-trading algorithms, that can analyze the vast amount of data more quickly and efficiently. Despite this big betting on AI, BlackRock’s President, Robert Kapito, stated that he believes the future will be all about humans and machines acting together. Mr. Kapito affirmed that Artificial Intelligence is just a way to make them much more efficient and that the machines won’t be fully replacing humans in the investment world.

UBS AG Swiss Bank Implementing Artificial Intelligence Solutions

Among many banks pushing into Artificial Intelligence, the Swiss Bank UBS AG is also replacing its front-office roles by robots. The company is implementing AI systems that optimize trading strategies.

Developed in collaboration with Deloitte, UBS automated program deals with clients’ post-trade allocation requests. The system scans detailed clients emails describing how they would like to allocate large block trades among funds. It then processes these and executes the transfers. This solution performs in two minutes a task that would take a person about 45 minutes.

The second new system uses Machine Learning to develop new strategies for trading volatility on behalf of clients. It scans vast amounts of trading data and creates a strategy based on learning from market patterns. In the end, the strategy has to be approved by human employees.

JPMorgan Deploys Mosaic Smart Data For Fixed Income Trading Business

JPMorgan Chase has also landed in the Artificial Intelligence floor. The investment banking giant is implementing Mosaic’s Smart Data platform across its entire fixed income trading business. The system utilizes AI and predictive analytics to identify insights from the huge volumes of trading data.

The program, which is based on Machine Learning, helps to analyze the best way to execute a big block trade by reading market conditions. According to Mosaic CEO, this system is not about replacing human jobs, but instead to improve their performance and make it more efficient.

I Know First Artificial Intelligence Algorithm

I Know First is a Fintech company that is specialized in providing daily investment forecasts based in an advanced, self-learning algorithm. The algorithm, which can predict over 3,000 financial assets, utilizes Artificial Intelligence and Machine Learning techniques to identify patters in large sets of historical stock market data in order to predict its behavior.

The I Know First algorithm generates daily market predictions for stocks, commodities, ETF’s, interest rates, currencies, and world indices for the short, medium and long term time horizons. It is designed for large financial institutions, banks, and hedge funds in the capital market as well as private investors looking for an advanced algorithmic support system.

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