In a 20 Nov 2025 speech, Fed Governor Lisa Cook addressed emerging risks associated with AI and machine-learning algorithms in trading venues. She warned that while such technologies can enhance liquidity and efficiency, they also pose “black box” risks where neither regulators nor operators can fully explain decisions made by the algorithms.
Cook pointed out that major exchanges, including the Chicago Mercantile Exchange, are beginning to demand greater reproducibility and auditability of AI models used in trade execution. She urged firms to maintain logs, provide access to regulators and prepare for potential policy action.
The wider context: as AI systems proliferate in finance, concerns about unintended systemic risk, algorithmic cascading failures and market manipulation are rising. Regulators globally are watching closely.
Fed Governor Warns AI-Driven Trading Algorithms Could Threaten Market Integrity
