Arbeitspapier

AI-driven Market Manipulation and Limits of the EU law enforcement regime to credible deterrence

As in many other sectors of EU economies, 'artificial intelligence' (AI) has entered the scene of the financial services industry as a game-changer. Trading on capital markets is undoubtedly one of the most promising AI application domains. A growing number of financial market players have in fact been adopting AI tools within the ramification of algorithmic trading. While AI trading is expected to deliver several efficiency gains, it can also bring unprecedented risks due to the technical specificities and related additional uncertainties of specific 'machine learning' methods. With a focus on new and emerging risks of AI-driven market manipulation, this study critically assesses the ability of the EU anti-manipulation law and enforcement regime to achieve credible deterrence. It argues that AI trading is currently left operating within a (quasi-)lawless market environment with the ultimate risk of jeopardising EU capital markets' integrity and stability. It shows how 'deterrence theory' can serve as a normative framework to think of innovative solutions for fixing the many shortcomings of the current EU legal framework in the fight against AI-driven market manipulation. In concluding, this study suggests improving the existing EU anti-manipulation law and enforcement with a number of policy proposals. Namely, (i) an improved, 'harm-centric' definition of manipulation; (ii) an improved, 'multi-layered' liability regime for AI-driven manipulation; and (iii) a novel, 'hybrid' public-private enforcement institutional architecture through the introduction of market manipulation 'bounty-hunters'.

Sprache
Englisch

Erschienen in
Series: ILE Working Paper Series ; No. 54

Klassifikation
Wirtschaft
General Financial Markets: Government Policy and Regulation
Financial Institutions and Services: Government Policy and Regulation
Corporate Finance and Governance: Government Policy and Regulation
Criminal Law
Business and Securities Law
Illegal Behavior and the Enforcement of Law
Technological Change: Choices and Consequences; Diffusion Processes
Technological Change: Government Policy
Thema
algorithmic trading
artificial intelligence
market manipulation
market integrity
effective enforcement
credible deterrence

Ereignis
Geistige Schöpfung
(wer)
Azzutti, Alessio
Ereignis
Veröffentlichung
(wer)
University of Hamburg, Institute of Law and Economics (ILE)
(wo)
Hamburg
(wann)
2022

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Azzutti, Alessio
  • University of Hamburg, Institute of Law and Economics (ILE)

Entstanden

  • 2022

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