A Little AI Goes a Long Way on Wall Street

David Leinweber and Yossi Beinart

Intelligent Systems in Accounting, Finance and Management, 1994, vol. 3, issue 4, 253-261

Abstract: This is a history and technical overview of one of the major AI successes in securities trading. It incorporates only as much AI as the financial user community could deal with, integrating tightly with their electronic environment. Computational resources are used to make a simple, highly application‐specific user interface, a small firm has succeeded in developing a system used by many of the largest institutional investors and money managers in the USA. The system is directly linked to the NYSE and other electronic equity‐execution systems. This is not a prototype or a proposal. This is real and in wide use today, often generating transaction volumes exceeding 5 million shares per day. Traders use a special‐purpose rule‐based language to describe a wide variety of market conditions. The system keeps up with high‐speed incoming market data in real‐time and tells the traders when, and how strongly, their specified conditions match the current state of the market. It can also formulate trading recommendations based on those conditions. Finally, and most importantly, it provides direct access to electronic execution channels for quick action on these recommendations. The combination of tight integration with both market data and electronic executions, an appropriate, accessible user interface, and a high level of support have contributed to a major AI success story. The transactions flowing through these systems produce more revenue on a good day than many other AI applications will generate over their entire operational lifetimes.

Date: 1994
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