Written reply to Parliamentary Question on impact of artificial intelligence on trading platforms in financial markets

In a recent parliamentary sitting, the Prime Minister of Singapore was asked if he was aware if the Monetary Authority of Singapore (MAS) has evaluated the influence of artificial intelligence (AI) on financial market trading platforms. Specifically, a current member of the Parliament inquired whether MAS has examined the risks related to „herding“ in securities trading which involves the use of AI models or data causing individuals to make similar decisions, and the possibility of conflicts of interest in cases where trading AI platforms consider both the platform’s and customers‘ interests without transparently informing customers.
In its written response, Mr. Lawrence Wong, Deputy Prime Minister and Minister for Finance and Chairman of MAS, noted the following:
(1) MAS mandates regulated financial institutions (FIs) to establish measures that prevent or lessen conflicts between their own interests and their customers‘ interests. This approach is impartial to technology and is applied uniformly to all regulated FIs.
(2) In 2018, MAS introduced the FEAT Principles to guide responsible utilization of Artificial Intelligence and Data Analytics (AIDA) by FIs. FEAT stands for Fairness, Ethics, Accountability, and Transparency. These principles necessitate FIs to ensure that adopting AIDA doesn’t lead to unfair treatment of customers compared to their own business. FIs are also obligated to transparently inform customers about their products and services to support well-informed decision-making.
(3) The likelihood of herding risks on trading platforms due to AI model usage is currently evaluated to be low since Singaporean FIs are still in an early stage of integrating AI models into decision-making. However, MAS is vigilantly observing and evaluating the risks brought about by AI in financial markets. MAS has collaborated with the industry to create a structure that lets FIs evaluate their AI systems against the FEAT Principles. MAS will continue an open dialogue with industry participants to ensure a „responsible use of AI in finance“.