Nasdaq receives SEC approval for AI-based trade orders

The artificial intelligence-based order type could make stock trading even more efficient.

Nasdaq announced that the United States Securities and Exchange Commission (SEC) has approved its request to operate the first exchange AI-driven order type on Sep. 8.

Called the dynamic midpoint extended life order (M-ELO), the new system expands on the M-ELO automated order type by making it “dynamic,” meaning it will use artificial intelligence to update and, essentially, recalibrate itself in real time.

⚡ Bringing AI to the capital markets: Today, @Nasdaq announced it has received @SECGov approval to launch Dynamic Midpoint Extended Life Order (M-ELO), the first artificial intelligence (AI) powered order type.

Learn more about this next step we are taking to modernize markets,… pic.twitter.com/vFkLdjM3Br

— Nasdaq (@Nasdaq) September 8, 2023

Order types are a set of software instructions that execute specific trade pairs at exact market pricing thresholds. This form of automation has been around for a while but the new AI-driven order type is the first of its kind to use real-time reinforcement learning AI to execute orders.

This should have the follow-on effect of substantially speeding up orders placed with the system. According to a data sheet published by Nasdaq:

“Calculated on a symbol-by-symbol basis, this new functionality analyzes 140+ data points every 30 seconds to detect market conditions and optimize the holding period prior to which a trade is eligible to execute.”

This is a developing story, and further information will be added as it becomes available.