Overuse of the same kinds of artificial intelligence systems by too many brokers and money managers could set the stage for future turmoil, according to
The financial crisis of the future might come about if market players "were all relying on the same model, the same algorithm, the same data," Gensler said in a Wednesday interview on Bloomberg TV with Alix Steel and Romaine Bostick.
Gensler, a film buff, likened the risk to the artificial intelligence bot featured in the film "Her," in which the thousands of romantic partners of Scarlett Johansson's character were left "heartbroken" when the system went offline. "I don't want that to happen in the financial sector," he said.
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The technology does bear promise for innovation and greater access to financial markets, but there's still a need to ensure there's a diversity of algorithms and guard against fraud, he said.
The SEC made a proposal in 2023 to require brokers and investment advisors to mitigate conflicts of interest in their use of AI tools that might put their interests before clients. Gensler previously has said the SEC's staff is still working on a rewrite of the rule after an initial round of comments.
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Gensler also touted the agency's approval earlier Wednesday of new rules to allow thousands of equities to be quoted in half-penny increments on major exchanges. The result could be narrower spreads between bid and ask prices that save money for investors, and it also might help markets such as the New York Stock Exchange to compete with wholesalers that already quote in smaller increments.
The changes could apply to about 2,400 securities, including stocks and exchange-traded funds.
"These rules will take about a year to be implemented, but come November 2025, I think that it will lower the cost of trading," he said. "It will help in the competition in the markets."
