AI and the Philippine capital market: Promise, pitfalls and safe adoption

Around the world, financial institutions are turning to artificial intelligence (AI) to reimagine how capital markets operate. It has been hailed as a force that can make processes more efficient, enhance surveillance and broaden access to financial services.

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In the Philippines, where policymakers and regulators are pushing to deepen domestic markets and modernize supervision, AI presents a compelling opportunity.

However, its adoption also raises questions about ethics, governance, accountability and systemic risk.

The potential use cases are wide-ranging. Back-office functions such as client on-boarding, know-your-customer (KYC) checks, reconciliation and compliance filings are time-consuming and prone to human error. Machine learning and robotic process automation can shorten processing times, reduce costs and improve accuracy.

Market surveillance is another promising frontier. AI tools can sift through enormous volumes of trading data to detect unusual patterns linked to insider trading, spoofing or layered manipulation much more effectively than rule-based systems.

Risk management is also fertile ground, with AI able to capture nonlinear relationships in market data and run complex scenario analyses that give investors and regulators a clearer picture of vulnerabilities.

At the customer interface, brokers and wealth managers are experimenting with AI to tailor investment advice and rebalance portfolios, potentially expanding retail participation. Supervisory agencies themselves can deploy the same technology to triage regulatory filings and scan corporate disclosures, making oversight more timely and efficient.