AI Hustle: News on Open AI, ChatGPT, Midjourney, NVIDIA, Anthropic, Open Source LLMs: SEC Greenlights Nasdaq's AI-Powered Order Type – What's Next?

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So the interesting thing here is that NASDAQ Incorporated has just received the green light

from the United States Security and Exchange Commission, of course, the SEC, to introduce

the market's first AI-driven order type.

So this groundbreaking development has the potential, I believe, to significantly enhance

the speed and also the efficiency of an already very high-velocity market.

The stock market right now is crazy, all sorts of stocks are on a tear, and there's all sorts

of very interesting things that are happening right now in that space.

So in any case, this approved order type, which is known as the Dynamic Midpoint, extends

life order or M.E.Lo, and it aims to accelerate the rate at which trades are matched and to

minimize market impact.

So both of these are crucial factors to optimizing trading outcomes for investors, but essentially

what the SEC has opted not to comment on the matter, so that's an interesting stance.

And NASDAQ's announcement comes at a time when the interest in AI applications in the

capital markets is steadily growing.

So traders employ various different order types as programmed instructions to guide

exchanges in the handling of their trades, and the M-E.Lo or M.E.Lo initially launched

back in 2018, and it's strategically designed for investors who play the long game.

So it operates on a 10 millisecond waiting period to enable longer-term investors to

interact and trade with one another.

So the dynamic iteration of M.E.Lo is particularly innovative as it utilizes a form of AI known

as reinforcement learning, obviously, right?

And this AI technology observes market behavior and makes real-time adjustments to the whole

holding period.

So the ultimate goal is to enhance both the quality of trade executions and the percentage

of orders filled in the market, and according to NASDAQ's own research, the AI-infused order

type has delivered promising results.

So they say that there is a 20.3% increase in fill rates and an 11% reduction in market

or in markouts.

So these statistics underscore, I think, the potentially transformative impact of AI-powered

solutions in capital markets.

Now, I'm definitely not a financial guru.

I am no expert in this field.

But from the layman's understanding, let me give you the layman's understanding of this,

and I'm sure if there are people that are, you know, if there is incredible traders,

make sure to join our Facebook group and give your own comments on this.

But from my understanding of this, from someone that is not, again, not financial advice and

not a financial guru, I've seen this in a small scale.

So back when the crypto markets were a rip in two years ago, I saw this in a sense where

I would very frequently, if you try to sell low-cap coins or coins with, you know, they're

not very popular.

They're kind of these alt coins, these smaller coins.

The problem would be there's only so many buyers, and sometimes it's hard to find buyers.

So there's something you could do where essentially you would adjust the rate that you would sell

these coins.

You pretty much put a discount on them, so you're like, I will sell my coin for the market

rate or up to like, you know, 10% lower than that rate, and there's some other adjustments

you could do.

Anyways, you pretty much have to increase your, you'd have to keep increasing your discount

rate.

I forget what the technical term for that is, until a point where it's going to just like

sell instantly.

Now, I'm assuming this is the same issue that we're seeing right now with these long-term

traders.

When they say long-term traders, I'm assuming that also means quote-unquote whales, right?

These big traders, they have really big, they have super large portfolios, and so when they're

trying to liquidate, I'm assuming that that's a little bit tricky.

So with this new AI system, essentially, they're getting a 20% increase in fill rates, so I'm

believing that the fill rate, like it's easier for them to actually fill the sale at the

right price with this AI the way that it's selling it.

And it's having an 11% reduction in markouts.

So that's my basic understanding of it, if I'm incorrect, feel free to correct me.

But Owen Lau, who is a senior analysis at Oppenheimer & Koch, he highlighted the competitive

advantages of this new development, and what it could offer the NASDAQ, and this is what

he said, quote, this new order type can increase order fill rate and reduce holding times if

successfully implemented, which could help NASDAQ take market share from other exchange

operators.

So this is interesting because this is not necessarily, this is obviously something that

benefits the quote-unquote consumer, whoever is consuming these services, right?

The traders and whatnot.

But by being able to more effectively fulfill these trades, they're arguing that the NASDAQ

itself, the entire exchange that hosts the entire, you know, many stock companies, obviously

the NASDAQ isn't the only stock exchange, but they're saying this is actually going

to help the NASDAQ as a whole to, you know, essentially take market share from other exchange

operators, so its own competitors.

So very interesting, people are quite bullish on this, right?

They're literally saying this is going to make the entire NASDAQ do better.

Very interesting to see how this plays out.

I think in summary of this whole thing, NASDAQ's kind of newly SEC approved AI driven order

type has the capability not just to revolutionize trade executions, but also to underscore this,

the really big role of artificial intelligence and financial markets.

So with early metrics indicating improved efficiency and performance, I think the new

order type could potentially significantly alter the landscape of modern trading.

Definitely an area we'll be following into the future and I'll keep you informed on.

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Machine-generated transcript that may contain inaccuracies.