Italy's Consob Embraces AI to Enhance Market Supervision

Consob, the Italian market watchdog, has launched a ground-breaking project to integrate artificial intelligence (AI) into its market monitoring duties. On Tuesday, the authority revealed that it has been using artificial intelligence to speed up the initial clearance process for listing prospectuses and improve insider trading detection.

According to Consob, AI algorithms have been created to help with early studies by quickly detecting suspected instances of insider trading. “These are algorithms that could support preliminary analyses for the detection of suspected cases of insider trading, to be followed by targeted investigation activities,” according to the regulator.

Consob emphasized the efficiency of AI, stating that the system could detect problems in three seconds, a process that would take a human analyst at least 20 minutes. This considerable increase in speed and accuracy is projected to improve the quality of controls and overall regulatory monitoring.

The testing phase includes two prototypes created in-house in partnership with the Scuola Normale Superiore University in Pisa in 2022, as well as a third model. These prototypes have shown encouraging results, showing that AI may play an important part in Consob's future operations.

As Consob continues ahead, the next step will be to move beyond the prototype phase and include AI in routine market regulating tasks. This move is expected to greatly improve Consob's capacity to identify and react to market abnormalities.

Italy is not alone in pursuing AI integration into financial regulation. Global regulators and watchdogs have acknowledged AI's potential to improve market monitoring. For example, in the United Kingdom, the Financial Conduct Authority has used AI to safeguard customers from online fraud, demonstrating the wide range of AI applications in financial regulation.

About Consob

Consob, or Commissione Nazionale per le Società e la Borsa, is Italy's regulatory institution in charge of monitoring the Italian securities market. Consob was established to safeguard investors and preserve market integrity. It oversees publicly traded firms, securities intermediaries, and investment service providers. The authority's primary responsibilities include monitoring financial markets, enforcing securities laws, and encouraging openness and efficiency in market operations. Consob aspires to improve its regulatory powers and maintain a stable and fair market environment via initiatives such as AI integration.