Nasdaq, the leading stock exchange operator, has introduced an innovative AI-powered order type that has the potential to revolutionize trading. Known as M-ELO (Market Extended Life Order), this order type is designed specifically for investors looking to make long-term investments on a neutral platform regulated by the SEC (Securities and Exchange Commission).
What sets M-ELO apart is its short waiting period before a trade can take place. This ensures that only serious parties engage in transactions, thereby improving the quality of trades. However, the real excitement lies in the new Dynamic M-ELO, which takes things a step further by utilizing AI to adjust holding periods in real-time. By doing so, it aims to enhance fill rates (the number of orders that get matched) and reduce the impact on stock prices. Initial tests of this dynamic approach have yielded impressive results, with the AI considering over 140 factors and increasing trade volume by more than 30%.
Traditionally, M-ELO relied on a fixed holding period based on general market conditions. However, Nasdaq recognized that real-time adjustment of this period could lead to significant improvements in trades. This realization gave birth to the Dynamic M-ELO, which has boosted fill rates by an outstanding 20.3% and reduced unwanted trades by 11.4%.
Nasdaq’s President, Tal Cohen, has emphasized the company’s commitment to innovation and its objective of creating better markets for all participants. Kevin Kennedy, an executive at Nasdaq, has highlighted the company’s long history of investing in technology, which has paved the way for the use of AI to enhance the market’s efficiency. In an increasingly unpredictable market landscape, Nasdaq aims to support its clients by providing top-notch markets and cutting-edge solutions.
However, Nasdaq’s foray into AI does not stop with order types. This year, the company has also introduced predictive AI to its US options markets. This initiative aims to improve efficiency and align strike lists more closely with market demand. With a staggering 1.5 million individual options symbols in the US, Nasdaq’s Strike Price Optimization Program employs predictive AI to identify which strikes are likely to be traded and which are not. This ensures an adequate number of strikes are listed, while also increasing liquidity and streamlining operations.
In conclusion, Nasdaq’s introduction of an AI-powered order type and its implementation of predictive AI in the US options markets demonstrate the company’s dedication to innovation and providing cutting-edge solutions. By harnessing the power of AI, Nasdaq aims to improve the quality of trades, boost liquidity, and adapt to the dynamic nature of the market. These advancements have the potential to transform the trading landscape, benefiting both investors and the overall market.
