The Ontario Securities Commission (OSC) has published a report, Artificial Intelligence in Capital Markets: Exploring the Use Cases in Ontario (the Report)exploring the use of artificial intelligence (AI) in Ontario’s capital markets.

The Report highlights current AI use cases, benefits, and challenges. The Report’s goal is to raise awareness of both the opportunities and risks associated with AI usage in the capital markets.

Key take-aways include:

  • Capital market participants are using AI to enhance their existing products and services, rather than creating new ones.
  • AI is at an intermediate stage of adoption in Ontario’s capital markets. The key value drivers of AI adoption in capital markets include:
    • Enhanced capacity to extract information and insights from enormous volumes of structured and unstructured data;
    • Greater automation of manual processes that involve handling and managing data;
    • More precise predictive analytics;
    • Better liquidity forecasting and hedging; and,
    • Increased end-user satisfaction through more personalized service.

The Report also found that most developed use of AI in Ontario’s capital markets is focused on three principal areas: improving the efficiency and accuracy of operational processes; trade surveillance and detection of market manipulation; and supporting advisory and customer service. However, use of AI in areas such as asset allocation and risk management, is not as well-developed.

Larger firms appear to be developing in-house AI solutions and using the technology in areas with greater financial risk more so than smaller firms, indicating that scale is important for the development of AI models, the Report notes. While capital market participants continue to employ and explore a range of AI technologies, natural language processing is the most common choice. Major challenges remain for AI adoption, including data constraints, accessing skilled labour, corporate culture, and governance.

The complete Report, Artificial Intelligence in Capital Markets: Exploring the Use Cases in Ontariois available for download from the website of the Ontario Securities Commission.

For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.

This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.