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In the rapidly evolving landscape of the capital markets industry, Generative AI has provoked both concern and excitement. Whether for good or ill, Generative AI is poised to revolutionise the capital markets landscape, and this cutting-edge technology has the potential to make a deep impact across the entire trade lifecycle, affecting everything from front-office to back-office processes. In this article, GreySpark Partners explores the potential impact of Generative AI on trading. 

Generative artificial intelligence (AI) describes the process whereby a machine scours the internet to create unique text – or other outputs – in answer to a query or instruction.

This emerging technology is driving debate in every industry, but its potential to enhance trading and investment banking has prompted a great deal of concern and elation, in equal measure. The introduction of AI could be a catalyst for rapid change and advancement, similar to the level of change introduced by electronic trading.

Most people have been introduced to generative AI using the well-known application, ChatGPT, which was released by OpenAI in 2023. To say that ChatGPT is AI’s ‘killer app’ would not be an exaggeration – it is the most popular app in the history of the world, with the closest rival being TikTok. To further put this into context, it took TikTok 10 months to reach 100 million users, while ChatGPT achieved this in just two.

What is less well known, and particularly relevant to the investment banking space, is that Generative AI is also capable of creating new datasets and models based on the wealth of information it can draw on via the internet. Generative models can be used to create synthetic data to train machine learning algorithms, which can, in turn, help traders identify patterns and make more accurate predictions of market trends.

The lure of AI is potent and, as it has the potential to reduce costs, improve efficiencies and provide new insights and opportunities, it cannot be ignored. The development and implementation of AI could be the next step in IT evolution, and as such banks are sinking significant investment into the analysis of current AI capabilities.

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