Japan Exchange Regulation ("JPX-R") and Tokyo Stock Exchange, Inc. ("TSE") have decided to take the groundbreaking move of applying artificial intelligence (AI) to market surveillance operations.
JPX-R and TSE have been examining ways to conduct more sophisticated market surveillance using AI technologies developed respectively by NEC Corporation ("NEC") and Hitachi, Ltd. ("Hitachi").
In conventional market surveillance operations, a broad range of orders that are likely to involve unfair trading are first identified by surveillance systems based on certain criteria. Surveillance personnel then conduct preliminary investigations to analyze the trading situation surrounding such orders. Based on these preliminary investigations, surveillance personnel determine the possibility of unfair trading before conducting detailed investigations.
To verify the effectiveness of applying AI technology, NEC's RAPID machine learning and Hitachi's Hitachi AI Technology/H were applied to preliminary investigations. The tests revealed that AI was highly accurate in determining the possibility of unfair trading. Unlike conventional surveillance systems, which identify cases based on preset patterns, AI is able to learn on its own and determine the possibility of unfair trading.
AI technology will be applied to preliminary investigations to allow surveillance personnel to focus on detailed investigations. While the final decision on conducting such investigations will continue to be made by surveillance personnel, this initiative is expected to facilitate even more in-depth and detailed investigations and contribute to the fairness of the JPX market.
JPX-R and TSE will continue to work toward the actual application of AI to market surveillance in FY2017.