Entities warned not to rush into innovations
Artificial intelligence is expected to drive efficiencies in risk management and operations in the financial markets, but as an area of rapid change and expansion, it can potentially create new and different risks and issues, according to ASIC Chair Joe Longo (pictured above).
“What is clear is that there is as yet no real consensus on how to regulate AI, if at all,” Longo said in a speech at the ISDA/AFMA Forum, as he highlighted the need to answer, some would say existential, questions regarding how to regulate the use of AI.
Recently, the government issued a discussion paper, “Safe and Responsible AI in Australia,” seeking input on how Australia should approach this question. Longo urged everyone to read the paper and express their views on the topic.
“To be clear, my and ASIC’s interest is – and will always be – the safety and integrity of the financial ecosystem,” he said. “As with any new technology, to the extent that AI affects that ecosystem, to that extent we will be involved. As we realise the potential of tech, we have to do all we can to avoid negative disruption, learned market abuse, misinformation, discrimination, and bias – whether intended or unintended.”
Longo also warned entities against rushing too quickly into innovations – in fear of being left behind – without applying appropriate controls and proper governance, which he said could lead to poor decisions, outcomes, or controls.
“Entities need to focus on robust governance and operational resilience measures,” he said. “This is nothing new – just because the technology has changed, nobody should think that means your existing obligations around good governance have changed with it. They haven’t. But it’s all too easy to forget this in the face of such rapid and unprecedented change. Easy – and dangerous.”
Next financial year, ASIC is planning to consult on expanding automated order processing rules to futures markets to reflect developments with AI. The corporate regulator also intends to update its electronic trading guidance for the same reason.
“ASIC will also continue to scan the environment to understand how AI is being applied and the risks and opportunities attached to those methods of application,” Longo said. “We will look at other developments in this space as well, such as crypto tech – digitisation of assets, carbon markets, FX, and lending.”
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