Nasdaq Announces First Exchange AI Powered Order Type Approved By the SEC
08 Settembre 2023 - 2:00PM
Nasdaq (Nasdaq: NDAQ) today announced it has received SEC approval
to launch Dynamic Midpoint Extended Life Order (M-ELO), the first
exchange Artificial Intelligence (AI) powered order type.
Nasdaq's M-ELO matches like-minded counterparties with
longer-term investing horizons on a broker-neutral SEC-regulated
Exchange by requiring each party to a trade to wait a short period
of time before trading. Dynamic M-ELO will leverage Artificial
Intelligence to provide real-time changes to holding periods for
M-ELO participants, which is set to improve fill rates and reduce
market impact. The order type applies an AI model with over 140
factors and offers an average combined volume-weighted improvement
of over 30% in testing. Dynamic M-ELO simultaneously enhances both
liquidity and execution quality improvement outcomes, usually
considered mutually exclusive, by adjusting dynamically to
real-time market conditions.
The traditional M-ELO order type was originally designed using a
static holding period set to common, nonspecific market conditions.
Through extensive research and market participant feedback, Nasdaq
found that high-quality executions and protection against adverse
selection are improved when the holding period is dynamically
adjusted to real-time market conditions. Based on that research,
Nasdaq developed the first real-time AI order type, Dynamic M-ELO,
which has shown a 20.3% increase in fill rates and an 11.4%
reduction in mark-outs1.
"As part of our commitment to modernizing markets, Nasdaq takes
a thoughtful long-term approach to technology adoption and
advancement to ensure we drive innovation in a responsible manner"
said Tal Cohen, President of Market Platforms at Nasdaq. "AI
powered Dynamic M-ELO is a purpose built solution that encapsulates
our ambition to cultivate the quality of our markets and
underscores our commitment to delivering innovative products and
tools that benefit all market participants."
"Through decades of investment and experience in underlying
technological infrastructure and data standardization, Nasdaq is
able to leverage new technology, including AI, to improve price
discovery and market efficiency," said Kevin Kennedy, Executive
Vice President, North American Trading Services at Nasdaq. "Dynamic
M-ELO delivers optimal outcomes to market participants by
intelligently adapting to real-time market conditions, which
improves overall execution quality and fill rates. As our clients
operate in an increasingly dynamic market environment, we look
forward to partnering and supporting them with best-in-class
markets and innovative solutions."
In addition to the AI powered order type, Nasdaq also
implemented predictive AI in its US options markets this year. The
initiative was designed to improve overall efficiency and provide
strike lists more aligned to market and client demand across all
six of Nasdaq’s US options exchanges.
With almost 1.5 million individual options symbols listed in the
US, Nasdaq recognized a need to improve capabilities in determining
new strike listings. Nasdaq's Strike Price Optimization Program
analyzes the millions of possible daily symbols and uses predictive
AI to estimate their potential demand. The program then determines
which strikes are likely to trade and which are not, keeping total
strikes listed flat while improving liquidity and internal
operational efficiency. All changes suggested by the innovative
AI-powered program are reviewed by human eyes daily to ensure
accuracy and completeness. The new process streamlines the human
power needed to determine new listings, which previously required
daily manual analysis of millions of symbols.
Please visit our website for more information on Dynamic
M-ELO:https://www.nasdaq.com/docs/2023/09/07/1781-Q23_Dynamic%20M-ELO%201%20Pager_NAM-vf.pdf
About Nasdaq
Nasdaq (Nasdaq: NDAQ) is a leading global technology company
serving corporate clients, investment managers, banks, brokers, and
exchange operators as they navigate and interact with the global
capital markets and the broader financial system. We aspire to
deliver world-leading platforms that improve the liquidity,
transparency, and integrity of the global economy. Our diverse
offering of data, analytics, software, exchange capabilities, and
client-centric services enables clients to optimize and execute
their business vision with confidence. To learn more about the
company, technology solutions, and career opportunities, visit us
on LinkedIn, on Twitter @Nasdaq, or
at www.nasdaq.com.
Media Relations Contact:
Gabrielle Vennitti
+1.914.510.3354Gabrielle.Vennitti@nasdaq.com
-NDAQG-
1 Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change to Amend Rules 4702(b)(14)
and (b)(15) Concerning Dynamic M-ELO Holding Periods,
https://www.sec.gov/files/rules/sro/nasdaq/2023/34-96600.pdf
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