Italy: Consob tests AI for market supervision, insider trading detection

Milan: Italian market watchdog Consob has been testing artificial intelligence (AI) for use in the initial approval process of listing prospectuses and to help identify insider trading, the authority said on Tuesday.

“These are algorithms that could support preliminary analyses for the detection of suspected cases of insider trading, to be followed by targeted investigation activities,” the watchdog said.

“The algorithm takes three seconds to catch an error, the expert human analyst at least 20 minutes,” the authority said in slides attached to its annual report.

Testing activities were conducted last year on two prototypes developed in-house in 2022 along with the Scuola Normale Superiore university in Pisa, and also a third model was developed.

Embracing AI should improve the quality of controls to detect wrongdoing. The next step will be to move from the prototype phase to incorporating AI into the regular activities of the market regulator.

Regulators and watchdogs in other jurisdictions have been keen to tap the potential from AI.

In Britain, the Financial Conduct Authority has been using AI to help protect consumers from online scams.