The U.S. Senate raised concerns that the expanding use of artificial intelligence by hedge funds could pose risks to investors and the financial market. It remains uncertain whether the U.S. political arena will initiate regulations on this matter.
According to industry sources on the 26th, the U.S. Senate Committee on Homeland Security and Governmental Affairs recently released a report titled Hedge Funds’ Use of AI in Trading.
The report highlights that the risks will increase as hedge funds and other investment vehicles increasingly use AI and as the development and potential use cases of AI advance.
The Committee stressed, “Congress and regulatory agencies need to address the risks associated with the use of related technology in the financial services sector, so the public can better understand how current regulations apply to AI.” They noted that hedge funds are actively utilizing AI in aspects of trade decisions, including pattern identification and portfolio composition, with some hedge funds heavily relying on these systems.
However, the report pointed out that it is unclear how the existing framework specifically applies to the use of AI. The public lacks clarity regarding the information and scope of risks associated with AI and machine learning in the financial sector. The Committee criticized the use of AI-generated content to manipulate the market and other external uses of AI that could amplify risks to market stability. They emphasized, “Congress and regulatory authorities need to establish safeguards to ensure AI is being used in ways that minimize risks to investors and market stability.”
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