KUALA LUMPUR: The use of artificial intelligence (AI) in trading applications in capital markets has accelerated significantly in the past couple of years, leading to increasing concerns over its regulation, said an economist.

Dr Reena Aggarwal, a finance professor from Georgetown University, noted that regulators and policymakers are now trying to figure out the potential effects of technologies like AI on equity trading and the future market environment.

"AI is being used in so many ways today and the extent to which AI is being used for trading purposes has been growing tremendously. Policymakers and regulators are concerned about what the implications might be on capital markets.

"Will everybody try to exit the door or get in at the same time, and will there be any bias in the algorithm that is being used for trading," she said during a panel session at the 63rd World Federation of Exchanges (WFE) General Assembly and Annual Meeting here today.

According to Aggarwal, the use of AI is expected to influence investors' behaviour and transform market participation in equity trading as well as asset management in the future. While acknowledging the need to encourage innovation in trading, Aggarwal highlighted the importance of implementing regulations to safeguard investors.

"You want innovation to happen in trading, but at the same time you need regulations to make sure that investor protection is there, so policymakers are trying to figure out what to do with AI. At Georgetown University's Psaros Center for Financial Market and Policy, we try to educate policymakers and regulators about these emerging issues," she said, adding that the use of other technologies such as tokenisation and blockchain in trading is also on the rise.

The 63rd World Federation of Exchanges (WFE) General Assembly and Annual Meeting hosted by Bursa Malaysia Bhd is WFE's flagship conference that brings together the captains of industry among global exchanges, regulatory authorities and key institutions for high-level discussions on major issues surrounding the industry.

This year, more than 300 delegates and representatives of 50 organisations from all over the globe participated in the three-day event. The last time Malaysia hosted the conference was 26 years ago in 1998.