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- 1 Nasdaq Inc. (NDAQ.O) won approval from the U.S. Securities and Exchange Commission to launch the first exchange A.I driven order.
- 2 If successful it could increase the efficiency of the fast-paced stock market.
Nasdaq says that the approval for the dynamic midpoint extended life order (M-ELO) would speed up the frequency at which orders are matched and will reduce the market impact. This will result in better trading outcomes for investors.
The first M-ELO was released in 2018. It enables investors with long-term vision to trade with each other using a 10-millisecond waiting period. The advanced version of this will use the AI technique known as reinforcement learning to watch market behavior and also improve the quality of execution in the market by making real-time adjustments.
What is the New AI-Based Order Type
The order types are instructions that are programmed to tell exchanges how to handle the trades. The news makes its way due to the increasing interest in the field of AI and how it will be used in the crypto markets.
Owen Lau, a senior analyst at Oppenheimer and Co. said that this new order type will increase the fill rates and decrease the holding time which will help Nasdaq gain market shares from other exchange operators.
The research of Nasdaq shows that the real-time AI order type has a 20.3% increase in fill rates and a reduction of 11.4% in markouts. This shows the improvements AI solutions can bring to the capital markets.
The arrival of AI in the fintech sector has affected the financial sector. ChatGPT is used as an educational tool for both cryptocurrency and traditional stock. It has the potential to provide real-time insights into the market trends. This is very helpful in making future projections. AI can read and evaluate the data so market analysis can be done with it.
The AI order type can make stock trading more efficient. Nasdaq’s request to operate the first exchange AI-driven order type was approved by the U.S. SEC on September 8. Dynamic Midpoint Extended Life Order (M-ELO), which is the first artificial intelligence-powered order type will develop itself in real time.
According to the data sheet published on Nasdaq “Calculated on a symbol by symbol basis this new functionality analyzes 140+ data points every 30 seconds to detect the market conditions and optimize the holding period before which the trade is eligible to execute.”
Summary
AI will play an important role in the fintech world. In a major step, Nasdaq got approval from the U.S. Security and Exchange Commission for first exchange AI-driven order type. Nasdaq says that if fortunate it will result in better trading outcomes and it will also enhance the efficiency of the market.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
