New frontiers in financial markets: from machine learning to algorithmic trading

Abstract

Fintech, Distristributed Ledgers Tecnology (DLT), blockchain, machine learning, algorithmic trading and High Frequency Trading (HFT), are among the most disruptive digital innovations that are transforming the structure of any industrial sector, including the financial industry. Together with the positive spillovers of the introduction of these new technologies (i.e. reducing transaction costs, reducing operating costs, improving speed and security of the transactions, ...), we should be aware of the potential new risks that may involve the financial system, whose activity is guaranteed by the trust of the operators. Regulators and supervisors should therefore extend their understanding of the new technologies, both to assess their potential impact on banks' business models and to address risks arising with due caution. Similarly, banks operating within the new technological framework, must rethink their own business models and consider the upcoming challenges, which require specific knowledge and skills.