Composing the future: Balancing innovation and human expertise in financial markets

Introduction

The evolution of financial markets must continue to balance technological progress with the irreplaceable value of skilled professionals. As we gather in these rapidly shifting times, I invite you to picture our industry as a grand orchestra.

Artificial intelligence and advanced analytics are the newest instruments added to our ensemble—powerful, transformative, and full of potential.

However, just as a symphony requires the skilled touch of its musicians to bring music to life, financial markets also require the expertise of well-trained analysts.

Technology may amplify our capabilities, but it cannot replace the judgement and insight at the heart of our craft.

Striking the balance

Our markets have long been developing in line with technology developments. 

We are experiencing dramatic advancements in technology. Artificial intelligence (AI) could transform financial services. 

The FCA is supportive of this, including the development and deployment of AI-based solutions.

We want firms to grasp the opportunities that new technologies bring. We are pro-innovation and encourage firms to test their new products and technologies. 

Examples of this can be seen through our Regulatory Sandbox for firms wanting to test new products live in the market, with real consumers. 

Additionally, in 2024 we hosted a Market Abuse Surveillance TechSprint.

The initiative aimed to explore how advanced solutions, particularly those using AI and machine learning, could improve the detection of evolving and complex forms of market abuse. 

This enabled firms to experiment, test and refine AI models to improve surveillance accuracy, reduce false positives, and detect complex abuse patterns, all within a safe and supportive regulatory framework.

This TechSprint yielded positive collaborations between market participants. 

But we must manage the risks associated with advancements in, and utilisation of, technology in our markets. We are technology-agnostic and focused on outcomes, governance and resilience. 

Not the specific tools used. 

We welcome the use of good technology in financial markets, including surveillance.

Whether it be AI, Large Language Models, or other advanced analytics. As long as firms maintain strong governance, oversight and testing. 

However, responsibility for AI models and their behaviour must rest with firms. 

A machine may not always be able to recognise behaviour an analyst would know is deceptive or wrong. It will want to maximise profitability, and that’s why having a human in the loop is essential to ensure AI is safe and responsible.  

Technological advancements bring opportunities, but as I have mentioned before, we must counteract this risk in an appropriate fashion. 

We are pro-innovation… but not at the expense of oversight. We must strive to find the correct balance.

AI does not introduce new risks, but rather amplifies existing ones - especially around explainability, data quality and model validation. 

At a time when the industry is rightly energised by the potential of AI and advanced analytics, it’s worth remembering that markets remain complex, nuanced and deeply human. 

The value of skilled, well-trained analysts - those who understand market behaviour, context and intent - is not diminished by technology. 

If anything, it’s amplified. 

AI can support and enhance decision-making. But it cannot replace judgement. 

And it’s not just market participants that should be considering how technology can help them with their objectives. 

We at the FCA need to ensure that we are keeping pace with technological advancements. 

Market Oversight receives over 8 billion Markets in Financial Instruments Directive (MiFID) transaction reports per year, 400 million order book messages and 53 million UK European Market Infrastructure Regulation (EMIR) derivative reports daily and over 1 billion UK Securities Financing Transactions Regulation (SFTR) reports on securities financing transactions yearly.  

We must ingest, clean, and turn that data into useful information that can inform our activities. Our technology must continue to evolve so that we can provide key insights across the organisation. 

But the policy that underpins this technology must maintain the same tempo as technological development. 

We will soon be publishing our Consultation Paper seeking views on improving the UK transaction reporting regime.

And it will also set our long-term vision for all the datasets I mentioned just now. It is essential that we streamline these requirements to ensure they work in harmony.

Please do look out for this if it’s relevant and provide your feedback. 

We want to ensure all views, big or small, are taken into consideration. 

We are committed to this and continue to invest in our tech capabilities. 

Included in this commitment is a desire to evolve and develop our market monitoring capabilities. 

Through a combination of new data, tech tools and market expertise, we are committed to being as informed as possible across all asset classes and markets. 

The improvements in this space will enable us to deliver insights to colleagues sooner. Interventions will therefore be delivered at pace and stop, slow down or prevent harm occurring in our markets. 

Embracing the future through collaboration

The future is uncertain - that much is certain. 

But with uncertainty comes possibility. 

By coming together, sharing best practices, and supporting one another, we can not only navigate the challenges ahead but thrive. 

I am fortunate that, in my role that I attend the Markets Practitioner Panel[2], an independent statutory body where panel members, all of whom are financial market participants, provide advice and challenge. 

The insights we gain from those sessions are invaluable. As are all the other independent panels across the whole of the FCA’s work.

We can’t deliver on our priorities alone. In order to succeed, we must collaborate and support others. That includes everyone here today.

This works both ways. I don’t want the first thought in a market participant’s head to be negative if they receive an email from me.

I’m not only in this role to police reporting requirements or pursue an individual for insider trading. 

Of course, these are crucial functions which contribute to clean markets. Clean markets encourage investment and growth.

But I am also here to help. To come up with solutions that can benefit the wider economy and market. 

It is vitally important that we collaborate with you. We look forward to continuing to do so.

Without collaboration, opportunities could be missed.

We don’t know what we don’t know.

As our orchestra plays on, let us remember that the best harmonies are achieved not by one instrument alone, but by the collaboration of many. 

The use of AI and analytics merely expands the repertoire; it does not diminish the need for talent, training, and experience. 

In fact, the stage is set for analysts to shine brighter than ever before, guiding our industry through complexity with judgement and skill. 

Let us continue to compose the future of financial markets together, blending innovation with human expertise.