self-driving finance

The term for computer-driven finance, using artificial intelligence and machine learning to control the exchange of funds between lenders, investors, and borrowers.

Historical perspective: In late 2017, "self-driving finance" was identified as a regulatory concern by the Financial Times who said it could turn into a runaway train. No one knows who’s liable if a program goes haywire, as regulators struggle to keep pace while self-driving finance has quietly come to dominate our markets. At this time, just 10 percent of U.S. stock market trading is conducted by human brokers; the rest is driven by automatic systems, such as computerized high-speed trading programs. Humans write this code, and sometimes oversee trades but machines are increasingly taking on even those roles. Regulators estimate that computers are now generating 50 to 70 percent of trading in equity markets andn 60 percent of futures, with artificial intelligence and machine learning being applied to huge amounts of data to product investment advice. This shift to self-driving investments has taken place with minimal public debate, and is indeed moving faster than politicians and voters understand and taking over legal and regulatory frameworks. If a self-learning financial program goes haywire, who exactly will be left holding the bag? Regulators can't keep up, and they are finding it difficult to even assess how a computer-driven flash crash might spread throughout markets. Digital devotees will no doubt argue that the benefits of innovation more than offset the risks. But we need to have a public debate about the computing revolution in finance before it's too late.