Assessing the AI Impact on Financial Markets through Algorithmic Trading

DOI: https://doie.org/10.10399/JBSE.2025811561

Neeraj Kahol Sharma

Keywords:

Algorithmic Trading, Artificial Intelligence, Market Efficiency, Risk Management, Financial Regulation

Abstract:

This paper attempts to analyze the effects of AI algorithmic trading on the financial markets. The brakes of algorithmic trading are being transcended by the evolution of machine learning, deep learning technologies, and even reinforced learning. The evolution of AI poses ethical issues in addition to market volatility and systemic risk. My approach combines qualitative and quantitative analyses to evaluate the magnitude of improvements in the efficiency of the trading system with the implementation of AI compared to legacy systems. The results of the analysis show that the concerns of regulators with emerging AI technologies are indeed warranted; but the positive impacts AI technologies bring to the performance of markets are difficult to dismiss. This paper suggests the development of algorithms for trading with AI systems to enhance control, transparency, and governance.

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