97 Things About Ethics Everyone in Data Science Should Know

Chapter 59. Ethics, Trading, and Artificial Intelligence

John Power

Professor, Mercy College School of Business

The US stock market conjures an image of adrenaline-fueled traders yelling out orders on a trading floor. That image is a memory. Now computers do most of the trading, silently—and very, very quickly. This trend is likely to accelerate with the inclusion of machine learning and artificial intelligence replacing ever more direct human interaction with the marketplace. The question that immediately comes to mind is: since the marketplace, and all its rules and regulations, has been structured primarily to protect investors, does this trend constitute a problematic ethical environment for the average investor?

The market structure was designed primarily to protect investors from corporate behavior and not from other investors. Since the formation of the Securities and Exchange Commission (SEC), there have been traders who were faster than others, and the SEC does not seem to be making a distinction about why that is the case. Technology-enabled investments are not a focus for them. Rather, the regulators are focused on the fact that these algorithmic trading practices provide incremental liquidity that benefits the overall market. The current approach seems to be to take no action. This is likely true for the foreseeable future.¹

The average investor buying or selling shares ...