Banks Rewrite Old Code with AI

CHICAGO BOOTH

Surprisingly, the most engagement I generally receive on social media is when I write a synopsis of an academic paper on AI + finance.

I didn’t realize there was so much interest until I started covering them.

This has led me to start writing for Chicago Booth Review, the research publication of the University’s business school.

In the article, I write about how the researchers applied transformer technology, the same that powers ChatGPT and the current AI boom, to fixed income markets. Their research suggests that much like how transformers can predict the next word in a sentence, they can do the same with bond downgrades.

This is a topic I’ve been writing more about here. How we’re in the early stages of companies applying transformers beyond just language. Stripe trained a model on the “language” of payments, and another company did so on grocery data. I imagine some firm, with a lot of computing power, is doing so for stock return data.

I’m writing a longer feature for Booth, which gives me room to quote experts. The piece is on “Interpretability,” which I just learned tries to verify how AI “thinks.”

(It’s still pretty wild to me that even the AI experts still don’t really know how AI works.)

But through some very preliminary reporting, it looks like experts are starting to make progress understanding AI interpretability.

If you’re in this field or have some suggestions of folks to talk to, please reach out: [email protected] 

NEWS + ANALYSIS

AI Rewrites Dead (Programming) Language

COBOL is the NYC subway of the financial system. Both are still in use decades after their creators intended. You can’t take either offline for long…

It’s funny that the infrastructure of the global financial system is in part built on a computer language so old that developers have to decipher it like the Dead Sea Scrolls!

You can see how this would be a big issue at banks.

Sandra Nudelman, CEO of RecodeX, a company that specializes in transforming code from one language into another, told me that while LLMs are helping, it’s still a tall order:

Takeaway: While LLMs can help modernize code, they’re not quite able to rewrite legacy code without a lot of oversight just yet.

PACE OF CHANGE

AI Compresses Timelines

Mary Meeker, an influential venture capitalist and internet researcher, put out her first report in about six years about AI, talking about the pace of change in the industry.

We've touched on some of the points she makes like how the price of using AI is dropping precipitously (down 99% in two years). But the very long report (at 340 pages) is chart driven and easy to skim.

• Trends in Artificial Intelligence: (Meeker’s report)

• It’s not your imagination: AI is speeding up the pace of change (TechCrunch)

Takeaway: I’ve heard from many experts building in this space who’ve said how surprised they are about the pace of change. And while I don’t think that our lives at work will be terribly different a year from now, they will be in 3 to 5 years.

REGULATION

AI Helps Spot Manipulation

I wrote about white collar crime for many years at Bloomberg and one of the most surprising aspects of the financial shenanigans is how reliant regulators are on technology.

I remember chatting with a former SEC attorney who was at the agency in the 90s, and he told me about how you have to go through paper trading documents to look for manipulation like insider trading.

Nowadays, much of the crime fighting starts with technology first i.e. the algorithm literally sends an email to finra or the SEC saying that this account traded in a way that is almost statistically impossible without inside information. Then the investigators go connect all the dots.

Takeaway: As we’ve seen, transformers, the tech behind ChatGPT, can connect the dots in new ways, so AI adoption at regulators will likely help spot market manipulation.

CALENDAR

Upcoming AI + Finance Conferences

I’ve put together a calendar of upcoming AI and finance conferences. Click on the image below to access links and event descriptions. Let me know if I’ve missed any and I’ll add them. Thanks!

ICYMI

OpenBB Goes Full Open-Source

Wall Street doesn't usually do open source. But OpenBB's Didier Rodrigues Lopes is changing that—100K+ signups and counting.

In last Sunday’s Markets Edition, I spoke with OpenBB founder Didier Rodrigues Lopes on how the company has scaled over the last four years and how you can access (for free) access 800K+ FED datapoints.

Takeaway: As AI gets cheaper and more private, tools like OpenBB let firms build custom workflows instead of conforming to out-of-the-box solutions. 

DIRECTORY

AI Tool Directory

I’ve put together a database of 50+ AI and investing tools categorized by use case, where you can search, for example, by due diligence or AI agents or earnings data. Each company card has a short description and a link to the platform.

I did my best to add all relevant companies, but I know there are probably more out there. If you know of any that should be included, please reach out: [email protected].

I plan to add more data on each company, but I wanted to see what interests readers most first. So please reach out with comments!

To access this (free) database, please recommend AI Street to someone you think will get value from reading AI Street. (Please don’t send this to a burner email; I can see where the referrals go 🙂)

Share the link below and after they join, you’ll receive the database by email.

WHAT ELSE I’M READING 

• AI Is Helping Executives Tackle the Dreaded Post-Vacation Inbox (Bloomberg)

• AI Is Learning to Escape Human Control (WSJ Opinion)

• JPMorgan Chase’s Gen AI implementation: 450 use cases and lessons learned (TearSheet)

• Jane Street hired an engineer from Google's AI team (efinancialcareers)

• Microsoft Touts AI Sales at Town Hall, Reveals Barclays Contract (Bloomberg)

• Can We Finally Use ChatGPT as a Quantitative Analyst? (Quantipedia)

• Derivatives Industry Bets on AI and Tokenization (Traders Magazine)

• McKinsey Leans On AI to Make PowerPoints Faster, Draft Proposals (Bloomberg)

• AI Can Help Predict Inflation, Bank of England’s Greene Says (Bloomberg)

• We have ‘surrendered more to the machines’, says quant fund titan Cliff Asness (FT)