The International Organization of Securities Commissions (IOSCO) has published a consultation report on the use cases, risks and challenges of AI in capital markets. The report, which is based on feedback from IOSCO's members and industry participants, discusses: (i) AI use cases in capital markets (which have evolved since IOSCO's 2021 AI report); (ii) risks, issues, and challenges related to investor protection, market integrity, and financial stability arising from AI; and (iii) steps that market participants have taken to manage risks and govern development and deployment of AI systems.
Key findings of the report include that firms are increasingly using AI to support decision-making processes (e.g., robo-advising and algorithmic trading) as well as for internal operations and processes. Commonly cited risks include malicious use of AI, concentration, outsourcing, and third-party dependency and risks arising from interactions between humans and AI systems, including a lack of accountability, insufficient oversight, and over-reliance on technology for decision-making. The report also discusses the varied regulatory responses to AI, with some regulators applying existing regulatory frameworks and others developing new frameworks to address the unique challenges posed by AI.
IOSCO is now inviting feedback on the content of the report and other potential areas of focus to inform its approach to developing tools which may help regulators combat the risks of AI in the future. Comments may be submitted on or before 11 April.
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