The U.S. Securities and Exchange Commission (SEC) has approved a new artificial intelligence (AI)-powered order type for Nasdaq’s stock exchange. This marks the first AI order type approved for an exchange. Nasdaq says the latest technology aims to improve efficiency and performance on its platform.

Nasdaq’s AI-Powered Trading Mechanism Gets SEC Nod

Nasdaq announced on Friday that it received approval from the SEC to launch its “Dynamic Midpoint Extended Life Order.” This new order type uses artificial intelligence (AI) to match buyers and sellers who plan to hold stocks for longer periods.

Traditionally, Nasdaq matched buyers and sellers using set waiting periods. But the company found using AI to adjust waiting times based on current market conditions improved results. The AI-powered order type increased fill rates by 20% and reduced unwanted trades by 11% in Nasdaq’s tests.

Nasdaq detailed that the technology analyzes over 140 factors in real-time. It then suggests optimal holding periods to reduce the impact of trading on stock prices. This benefits longer-term investors by finding them matches more efficiently, the company’s announcement explains.

Nasdaq President Tal Cohen said the new AI order type shows the exchange’s “commitment to delivering innovative products and tools.” Cohen insisted it would “cultivate the quality of our markets” and help “all market participants.”

The company also recently implemented AI in its options markets. The technology analyzes potential new options contracts and predicts which are likely to trade. This allows Nasdaq to improve liquidity while keeping total contracts listed the same. Crypto traders and exchanges are now leveraging AI to gain an advantage in markets.

The digital currency exchange Bybit recently introduced Tradegpt, an AI-powered generative chatbot that offers real-time crypto market data and trading tips. Kevin Kennedy, an executive at Nasdaq, said the exchange can leverage AI thanks to its tech infrastructure. Kennedy said as markets get more dynamic, Nasdaq aims to support clients with “best-in-class markets and innovative solutions.”

The SEC approval of Nasdaq’s AI order type shows both traditional finance and crypto exchanges continuing to modernize. More advanced technology promises to make trading faster and more efficient for Wall Street firms and everyday investors alike.

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