On September 8, 2023, Nasdaq announced that it had obtained approval from the Securities and Exchange Commission (SEC) to launch Dynamic Midpoint Extended Life Order, an exchange order type that is powered by Artificial Intelligence (AI ). It is the first exchange order type that is backed by AI to enhance efficiency.
According to a statement by the SEC-regulated exchange , the core principle behind Dynamic M-ELO is to match traders who share longer-term investment horizons, fostering a more aligned trading environment. What sets the order type apart is its requirement for both parties involved in a trade to wait briefly before executing the trade. Here is where the AI comes into play.
Nasdaq Enhances Trading with AI
Kevin Kennedy, the Executive Vice President for the North American Trading Services at Nasdaq, remarked: "Dynamic M-ELO delivers optimal outcomes to market participants by intelligently adapting to real-time market conditions, which improves overall execution quality and fill rates. As our clients operate in an increasingly dynamic market environment, we look forward to partnering and supporting them."
Dynamic M-ELO leveraged a sophisticated AI model encompassing over 140 factors that provide real-time changes to holding periods for participants. This adjustment is reportedly designed to improve the fill rates for orders and reduce market impact. During testing, the model showed an average combined volume-weighted improvement of over 30%.
Tal Cohen, the President of Market Platforms at Nasdaq, emphasized the exchange's commitment to responsible innovation in modernizing markets. He stated: "AI-powered Dynamic M-ELO is a purpose-built solution that encapsulates our ambition to cultivate the quality of our markets and underscores our commitment to delivering innovative products and tools that benefit all market participants."
AI Sweeps Traditional and Crypto Markets
In addition to its AI-powered order type, Nasdaq has introduced predictive AI in its US options markets. This initiative aims to enhance the overall efficiency and align strike lists more effectively with market and client demand across all of Nasdaq's US options exchanges.
Nasdaq is not the only player pivoting towards AI in the stock market. In a recent report by Finance Magnates, eToro and Bridgewise partnered to introduce Fundamental AI, a stock portfolio with 40 diversified stocks that reportedly offer investors a chance to outperform the market. The technology encompasses a list of 1,000 large companies available on eToro.
In the cryptocurrency landscape, the cryptocurrency exchange Bybit recently unveiled TradeGPT, an AI-powered education tool designed to transform how traders engage with the crypto market. Rival Crypto.com has introduced its AI-enabled platform based on Open-AI's ChatGPT, while Binance operates an AI-enabled learning tool integrated into Binance Academy.
