AI in Financial Decisions: Transparency, Accountability, and Fairness

AI's Role in Financial Markets

• 💡 Artificial intelligence is transforming capital and insurance markets, offering promise for efficiency, innovation, and access.
• ⚠️ Lawmakers must ensure AI is used fairly, transparently, and responsibly to avoid deepening existing inequalities or creating new forms of exclusion.
• 🎯 Key concerns include accountability, bias, data governance, and identifying who might be left behind.

NASDAQ's Use of AI

• 🚀 Mr. Cohen explains NASDAQ uses AI in two categories: products and business operations.
• 📈 In business operations, AI aims for productivity and efficiency gains, and to upskill employees.
• 🛡️ AI is already embedded in NASDAQ's products for market surveillance to prevent abuse, fraud detection to prevent financial crime, and regulatory reporting.

Democratizing Access with AI

• 🤝 NASDAQ has deployed AI-enabled order types approved by the SEC to democratize access to functionality that improves investor performance.
• 💰 This allows smaller broker-dealers and retail investors to benefit from advanced tools previously only accessible to firms with significant R&D budgets.

Transparency and Accountability in AI Decisions

• ⚖️ Policymakers must be clear-eyed about who benefits, who bears risk, and how bias shapes outcomes in AI tools used for credit scoring, loan eligibility, and fraud detection.
• 👤 Ultimately, humans must be responsible for AI-driven decisions, with clear governance structures assigning responsibility across the value chain.
• 📚 A 1979 IBM manual quote suggests computers should not make management decisions due to a lack of accountability, reinforcing the need for human oversight.