Gary Gensler, Chairman of the US Securities and Exchange Commission (SEC), has highlighted the potential transformative impact of artificial intelligence (AI) on financial markets. Gensler’s concerns stem from the concentration of power in a few companies developing the core models of AI technology. He warns that this concentration could lead to future financial crises.
Gensler cautions that such concentration will lead to a “herd effect,” with companies and investors relying on the same models or data sets. This uniformity of response increases the interconnectedness of the economy and makes a major crash more likely.
In addition, Gensler questions the extent to which AI tools in trading apps prioritize the investor. He specifically cites Robinhood Markets Inc. as an example. He emphasizes that investment advisors have a duty of care and loyalty, even if they use algorithms. Responsibility cannot be shifted to technology alone.
Gensler claims that the debate about the legal liability of AI is still ongoing, but suggests that companies should put in place fail-safe mechanisms to mitigate potential risks. He emphasizes that behind the seemingly autonomous AI chatbots are people who are responsible for their design, parameters and operations.
Finally, Gensler raises important concerns about the impact of AI on financial markets. The concentration of power and the possibility of a unified response from companies and investors could lead to future financial crises. It is crucial for companies to take responsibility and take protective measures to mitigate the risks associated with AI technology in the financial sector.
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