08.09.2023 15:16:45
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Nasdaq Says SEC Approves Launch Of First Exchange AI-Powered Order Type
(RTTNews) - Nasdaq, Inc. (NDAQ) announced Friday 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. Dynamic M-ELO has shown a 20.3% increase in fill rates and an 11.4% reduction in mark-outs.
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.
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.
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