MELI - AI Trading Is Disrupting Market Forces
2024-06-07 16:49:13 ET
Summary
- Up to 70% of transactions in US, Europe, and some Asian stock markets are executed through AI-driven algorithmic trading.
- Algorithms react to news and hard facts, often leading to short-term price movements that may not reflect the long-term prospects of a company.
- The market's price discovery function has been hindered by AI and index ETFs, leading to concentration of performance in a few select stocks.
AI is not the future of trading, it’s the present. In the US, Europe and some Asian stock markets, up to 70% of transactions are now executed through AI-driven algorithmic trading. That has fundamentally changed stock price behavior. Rapid and massive money flows have increased volatility and the magnitude of short-term price movements. Algorithms are binary: either sell or buy until the order is executed, no matter the price or value of the business....
AI Trading Is Disrupting Market Forces