AI Sits at the Heart of a Structural Shift in Equity Markets
Equity markets are entering a period of structural change, as longer trading days, regulatory reform and shifting capital flows converge at the same time. Notably, markets are set to get longer from December, while the Securities and Exchange Commission (SEC) has proposed rescinding Rule 611 and is discussing an expansion of Rule 605. Consequently, the conversation in equity markets is moving from whether longer trading days happen to who provides liquidity, where capital comes from and which risk controls apply. TabbFORUM explored these questions at STA's Annual Market Structure Conference in Washington, D.C. Jacob Rappaport, Managing Director, Head of Global Equities at StoneX, outlined the three forces behind this shift in equity market structure and why artificial intelligence (AI) underpins each of them.
Key Takeaways:
- Equity markets are getting longer from December, shifting the focus to liquidity provision, sources of capital and risk controls.
- The SEC's June proposal to rescind Rule 611 and the planned expansion of Rule 605 mark a move from prescriptive routing rules toward accountability and transparency.
- Over the last decade, mutual funds saw $3 trillion in outflows while close to $8 trillion flowed into exchange-traded funds (ETFs), more than a third of it international.
Why AI Underpins the Shift in Equity Market Structure
Artificial intelligence is the common thread running through the changes in equity market structure, according to Rappaport. "Underpinning all three of these things is AI," he said, describing it as a force that is shaping not only the industry's future but also how companies get built, how new regulation gets rolled out and how firms interact with clients.
At StoneX, this has meant moving AI "from the lab and into production" across research, quantitative development, client interfacing and data delivery, rather than focusing on single solutions in silos. Specifically, this multi-asset approach extends to international equities, where StoneX is the number one market maker in over-the-counter traded American depositary receipts (ADRs) and foreign securities. Consequently, investors accessing international equity markets directly or through ETFs can draw on a combined offering spanning StoneX's futures commission merchant, prime brokerage, custody and outsourced trading.
--- Written by Gus Farrow, Senior Manager, StoneX TV
--- Expert: Jacob Rappaport, Managing Director, Head of Global Equities, StoneX
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