Spotlight Review: Navigating the Evolving Role of AI in Wholesale Markets

Tags: AI, Controls, FMSB, Generative AI, Risks, Spotlight Review, Trading
Posted by: Colin Lambert
Last Updated: February 16, 2026

In this review, we explore the insights from the Financial Markets Standards Board (FMSB) on the current integration of AI in trading practices, its limitations, and potential risks as the technology advances.

The Evolving Landscape of AI in Trading: Insights from the FMSB Spotlight Review

In a world where technology rapidly advances, the intersection of artificial intelligence (AI) and trading continues to reshape the financial markets. The Financial Markets Standards Board (FMSB) recently released its latest Spotlight Review, titled AI in Trading: A Practitioner’s View of the Current Landscape, shedding light on the pervasive influence of AI in market processes and the implications for governance and controls.

Understanding the Current State of AI in Trading

One of the Review’s key findings is that while AI has become increasingly integrated into trading operations, it has yet to reach a level of autonomy in market-facing environments. This integration is marked by various use cases that showcase a spectrum of AI applications, from basic algorithmic trading strategies to more complex models involving risk management and market making.

The paper notably refrains from providing a rigid definition of AI, emphasizing the challenges posed by its rapid evolution. Instead, it offers a compilation of observations and case studies that reveal both the opportunities and risks associated with these technologies.

Case Studies: Insights into Practical Applications

The Review includes specific case studies that examine AI’s deployment in wholesale markets, focusing on areas such as:

• Model Risk Management: How AI can enhance traditional risk management frameworks and what unique challenges it presents.
• E-Trading Systems: Analysis of AI’s integration in electronic trading and its impact on efficiency and decision-making.
• Customer Relationship Management (CRM): Exploration of AI’s role in pricing strategies and client interactions.

Each case study highlights potential risks and business impacts, providing a comprehensive overview of the various ways AI is being applied in trading today.

The Importance of Human Oversight

Despite the advancements in AI technology, the FMSB emphasizes that market-facing AI remains under human supervision. The report indicates that while existing control frameworks are adept at managing many AI-related risks, they must adapt continuously to keep pace with the evolving landscape. Clear human accountability is essential for AI-driven decisions, mirroring the practices established with traditional trading systems.

David Shelton, global head of the FICC electronic trading and FX quantitative strategies group at Bank of America and chair of the FMSB AI Working Group, notes the ongoing need for firms to harness AI in a controlled manner. This requires leveraging existing risk management structures while acknowledging their limitations.

Balancing Innovation with Governance

Myles McGuinness, CEO of the FMSB, highlights the transformative potential of AI for wholesale markets, but he cautions that the benefits can only be realized through robust governance and accountability mechanisms. The Review serves as a timely reminder that as firms explore AI applications, the need for strong oversight and clear responsibility is more critical than ever.

The presence of effective controls and human oversight is vital in ensuring fair and effective markets as AI technologies continue to evolve. The FMSB points out that the scale and speed of some AI applications may strain existing guardrails, necessitating vigilant monitoring from market participants.

Conclusion

The FMSB Spotlight Review provides valuable insights into the current state of AI in trading, emphasizing both its potential and the importance of responsible deployment. As the financial markets embrace this technology, organizations must prioritize governance, accountability, and human oversight to navigate the complexities and mitigate risks associated with AI.

For a deeper dive into the Review’s findings, you can access the full paper here. As we look toward the future, striking the right balance between innovation and control will be crucial in unlocking AI’s full potential within the trading landscape.