“Artificial intelligence is to trading what fire was to the cavemen.” That’s how one industry player described the impact of a disruptive technology on a staid industry.
In other (less creative) words, AI is a game changer for the stock market.
While humans remain a big part of the trading equation, AI plays an increasingly significant role. According to a recent study by U.K. research firm Coalition, electronic trades account for almost 45 percent of revenues in cash equities trading. And while hedge funds are more reluctant when it comes to automation, many of them use AI-powered analysis to get investment ideas and build portfolios.
“Machine learning is evolving at an even quicker pace and financial institutions are one of the first adaptors,” Anthony Antenucci, vice president of global business development at Intelenet Global Services, recently said.
When Wall Street statisticians realized they could apply AI to investment trading applications, he explained, “they could effectively crunch millions upon millions of data points in real time and capture information that current statistical models couldn’t.”
Here are some ways companies around the world use AI for smarter trading.
Location: New Delhi, India
How it’s using AI in trading: Auquan’s algorithmic trading skills platform democratizes trading and helps finance companies develop high-quality trading strategies. Consequently, its clients are able to translate human skills into trading profits.
Industry impact: Auquan was recently named to the Techstars London Class of 2018.
How it’s using AI in trading: Epoque’s fully automated AI trading has three “engines”: a strategy engine that observes and analyses potential trades; an order engine that creates orders and performs operational actions; and a logical engine that handles active orders and uses machine learning to improve its performance.
Location: Warsaw, Poland
How it’s using AI in trading: Sigmoidal is a consulting firm that offers end-to-end machine learning, data science, AI and software development for business — including the trading sector. In one case, its team of experts helped formulate an investment strategy by developing an intelligent asset allocation system that used deep learning to predict every asset in a particular portfolio.
Location: San Francisco
How it’s using AI in trading: IBM-affiliated EquBot’s proprietary investment technology combines AI with an active exchange-traded fund (ETF). By gathering and processing data gleaned from various sources (news articles, social media postings, financial statements) around the world, the company systematizes the investment process to “build a cause-and-effect understanding of markets, companies and management.”
Industry impact: EquBot recently launched the AI Powered International Equity ETF targeting opportunities in developed international markets outside the U.S.
How it’s using AI in trading: Kavout’s “K Score” is a product of its Kai intelligence platform that processes massive diverse sets of data and runs a variety of predictive models to come up with stock-ranking rating. With the help of AI, the company recommends daily top stocks using pattern recognition technology and a price forecasting engine. Its model portfolios are enhanced by AI algorithms.
Location: San Diego, Calif.
How it’s using AI in trading: Overnight, Trade Ideas’ AI-powered self-learning robo-trading platform “Holly” subjects dozens of investment algorithms to more than a million different trading scenarios to increase the alpha probability in future sessions. Only those strategies with a success rate of 60% and above and a 2:1 profit factor are shared with traders the next day.
Industry impact: The company’s actionable intelligence considerably outperformed market benchmarks in the first quarter of 2018, returning 16% to the S&P’s -1.0%.
How it’s using AI in trading: Startup AITrading’s “trading ecosystem” combines AI and the trading community to increase earnings by scanning markets to locate optimal trading opportunities. Deals are done via blockchain-based smart contracts. All actions are logged on blockchain and cannot be changed.
Industry impact: The company recently announced a crowdfunding campaign to raise funds for its trading platform.
Imperative Execution Inc.
Location: Stamford, Conn.
How it’s using AI in trading: Comprised of experienced traders, analysts and engineers, Imperative Execution builds “efficient financial exchanges” with the help of its product IntelligentCross, which uses AI to optimize the trading of U.S. equities.
Industry impact: Hedge Fund chief Steve Cohen’s Point72 Ventures LLC recently became the first to invest in Imperative Execution.
How it’s using AI in trading: Infinite Alpha uses AI to facilitate crypto-asset trading. It offers protection to trading professionals via advanced authentication, encryption, hardware security modules and more. Using its intuitive dashboard interface, users can easily access account details, balances and transaction histories.
How it’s using AI in trading: Through its acquisition of Neurensic, Trading Technologies now has an AI platform that identifies complex trading patterns on a massive scale across multiple markets in real time. Combining machine learning technology with high-speed, big data processing power, the company provides clients with an ongoing assessment of compliance risk.
Industry impact: Chicago-based Neurensic was acquired by Trading Technologies in late 2017.
How it’s using AI in trading: WOA (which stands for War of Attrition) aims to boost client profits in part by employing AI for real-time market analysis. The service is available for only a select group of users that include fund-to-fund, hedge funds, ultra-high net worth individuals and sovereign wealth funds.
Location: Johannesburg, South Africa
How it’s using AI in trading: An autonomous stock trading system that requires no human intervention, Techtrader’s takes a human-like perspective on stocks and adds the discipline and attention span of a machine. The company claims that doing so is like "having a thousand traders each focusing on a single stock.”
Sentient Investment Management
Location: San Francisco
How it’s using AI in trading: Sentient uses AI to develop quantitative trading and investment strategies. By combining evolutionary intelligence technologies with deep learning algorithms (among other things), the company’s distributed AI system continuously processes and learns from vast amounts of data in order to develop new investment strategies.
Industry impact: Sentient recently received $25 million in seed capital, doubling its assets.
Location: New York
How it’s using AI in trading: The brainchild of Goldman Sachs and Millennium partners hedge fund alums, Algoriz employs experts in quantitative trading, machine learning and capital markets to create trading technology for the financial services sector. Users can construct trading algorithms sans coding.
Looking Glass Investments
Location: Milwaukee, Wis.
How it’s using AI in trading: Looking Glass combines proprietary analytics and big data to find "alternative fixed-income investments" for those in the marketplace loan sector. Clients include family offices, institutional investors and accredited investors.
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