Written reply to Parliamentary Question on impact of artificial intelligence on trading platforms in financial markets
Date: For Parliament Sitting on 2 August 2023
Name and Constituency of Member of Parliament
Dr Tan Wu Meng, Jurong GRC
To ask the Prime Minister whether MAS has assessed the impact of artificial intelligence (AI) on trading platforms in financial markets for (i) the risk of "herding" where individual actors make similar decisions due to similar trained AI models or similar data aggregates and (ii) the potential for conflict of interest when a trading AI platform system is simultaneously considering both the platform's interest and the customers' interests, especially if without disclosure to customers.
Answer by Mr Lawrence Wong, Deputy Prime Minister and Minister for Finance, and Chairman of MAS:
1. MAS requires regulated financial institutions (FIs) to have controls in place to avoid or mitigate conflicts between their interests and those of their customers. This approach is technology-neutral and is applied across all regulated FIs.
2. As early as 2018, MAS introduced the FEAT Principles to guide FIs’ responsible use of Artificial Intelligence and Data Analytics (AIDA) in their products and services. FEAT is an acronym for Fairness, Ethics, Accountability, and Transparency. Amongst other things, these principles require FIs to ensure that AIDA adoption does not result in customers being treated less fairly than the business. FIs are also required to provide customers transparent disclosures on the FI’s products and services, to facilitate informed decision making.
3. The risk of herding in trading platforms arising from the use of AI models is currently assessed to be low as FIs in Singapore are still at a nascent stage of using AI models for decision-making. Nevertheless, MAS continues to carefully monitor and assess the risks brought about by AI in financial markets. In recent years, MAS has worked with the industry to develop a framework which enables FIs to evaluate their AI systems against the FEAT Principles. MAS will continue to engage the industry on the responsible use of AI in finance.