Regulating AI in Financial Markets: Challenges and Opportunities in Algorithmic Trading

DOI

10.2991/978-2-38476-515-7_17How to use a DOI?

Keywords

Artificial Intelligence; Algorithmic Trading; Financial Regulation; Market Stability; AI Governance

Abstract

Global financial markets are heavily transformed with the support of modern fintech solutions, innovative technologies, and tools. Further enhancing the potential of the transformation, artificial intelligence tools have been widely integrated into the financial markets. Integrated with algorithmic trading systems, AI tools have an extended level of automation capability, decision-making efficiency. However, AI-integrated trading systems have created lots of global financial regulatory challenges for the stability of the global financial markets. This qualitative study adopts a systematic literature review method and comparative analysis of regulatory frameworks in select major economies. Four thematic dimensions were chosen for this study; they are efficiency, transparency, legal compliance, and risk in the system. This study outlined the benefits of the integration of AI in trading, such as better decision-making, speed, and portfolio performance. This study also observed major regulatory challenges for regulating AI trading systems and their potential impact on the stability of global financial markets. The study submitted that the lack of transparency in the models of AI integrated trading systems, and differences in the level of regulatory frameworks from a liberal approach to an extreme level of centralized monitoring, are the major challenges for developing structurally strong and sustainable global financial systems. This study suggested the need for explainable AI systems and harmonized regulation of AI in financial markets globally to ensure transparency, accountability, and stability of financial markets.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - K. Saidalavi
AU  - Tausif Ur Rehman Md
AU  - Syedah Fatima Zahara Jafri
PY  - 2025
DA  - 2025/12/26
TI  - Regulating AI in Financial Markets: Challenges and Opportunities in Algorithmic Trading
BT  - Proceedings of the International Conference on Law and Technology (ICLT 2025)
PB  - Atlantis Press
SP  - 185
EP  - 193
SN  - 2352-5398
UR  - https://doi.org/10.2991/978-2-38476-515-7_17
DO  - 10.2991/978-2-38476-515-7_17
ID  - Saidalavi2025
ER  -