Rakuten Securities, SBI Securities to use AI to detect market manipulation

Maria Nikolova

Technology developments have made market manipulation more complex and require the use of AI solutions for detecting and preventing market abuse.

Two Japanese brokerages – Rakuten Securities, a subsidiary of Rakuten Inc (TYO:4755), and SBI Securities, a subsidiary of SBI Holdings Inc (TYO:8473), are about to adopt artificial intelligence solutions, in order to adequately tackle evolving market manipulation schemes.

A report by Japan’s Nikkei says each of the brokerages will test AI software designed by NEC to detect market manipulation. The new systems are set to be ready for launch within the current fiscal year.

The AI software acts based on learning from past cases of illegal trading. It then flags suspicious activity. It searches for market manipulators who use techniques such as spoofing that involves placing large orders that are canceled before they are executed.

Brokerages have traditionally relied on human efforts to spot market manipulation. However, the volume and complexity of manipulation schemes have grown markedly. SBI Securities says it inspects 100,000 trading orders out of the 2 million placed daily.

An AI system, if implemented, would be responsible for both monitoring and inspection.

This is not the first time that Rakuten pushes into the world of AI. As reported by FinanceFeeds in April this year, Rakuten has teamed up with IBM Japan to create the “Rakuten AI Platform,” an internal Rakuten system which will launch chatbots with automatic response functions into customer support. The system was built utilizing APIs provided by IBM Watson.

Rakuten has been promoting AI research in areas like image recognition technology, as well as big data analysis.

Regarding the use of AI solutions to detect and prevent cases of market manipulation, we have to mention that early this year, Japan Exchange Regulation (JPX-R) and Tokyo Stock Exchange, Inc. (TSE) announced they are working on applying AI to market surveillance operations by using technologies developed by NEC Corp (TYO:6701) and Hitachi, Ltd. (TYO:6501).

NEC’s RAPID machine learning and Hitachi’s Hitachi AI Technology/H were used in preliminary investigations. The tests showed that AI solutions were highly accurate in identifying the possibility of unfair trading.

Read this next

Retail FX

Overcharts partners with dxFeed for CME Group Market Depth

“More and more traders are using Market Depth while conducting volume analysis. Its primary function is to help traders identify potential support and resistance levels.”

Digital Assets

CoinGecko expands collaboration with CER.live security rating

CoinGecko, one of the earliest crypto data aggregators, has integrated the security score data from the CER.live rating. The trust assessments given to crypto projects will be integrated into their pages on CoinGecko website to draw users’ attention to the importance of security.

Metaverse Gaming NFT

Klaytn taps Parity Technologies to build infrastructure for Klaytn-Substrate

Klaytn has initiated a collaboration with blockchain infrastructure company Parity Technologies to strengthen its tech stack and meet the demands of enterprises looking to harness the crypto technology.

Retail FX

US Retail FX brokers suffer steep fall in client deposits, Trading.com racked up $46K

Retail FX deposits at US brokerages, which have been struggling to eke out a profit in a strict regulatory environment, dropped in March 2022 by $35 million, CFTC data showed.

Retail FX

eToro supports Immutable X (IMX), Livepeer (LPT) and Cartesi (CTSI)

Israeli social trading network eToro has added support for trading three new tokens. Immutable X (IMX), Livepeer (LPT) and Cartesi (CTSI) are the next coins to join eToro’s list of featured digital assets.

Executive Moves

LiquidityBook hires Fintech veteran Jonathan Cross to lead EMEA business

LiquidityBook, a provider of FIX and OMS trading solutions for both the buy and sell-side, has added Jonathan Cross to its business team for the EMEA region.

Retail FX

Interactive Brokers’ traders now have direct access to TradingView

Professional charting and trading platform, TradingView has integrated the US-listed brokerage firm Interactive Brokers as the latest online trading partner.

Digital Assets

This Web3 infrastructure provider is on the verge of a radical upgrade

The crypto industry fueled the anticipation of the arrival of web3 with the introduction of Decentralized Finance, Metaverse, and more. And today, that web3 is finding support from various developers looking to build and develop the space to extract the most benefits out of it.

Digital Assets

Crypto bots: trading assistant 

The cryptocurrency market is a volatile one, with huge gains and dramatic dips. However, the most informed traders can use automated tools to maximize profits while minimizing risks. 

<