The Securities Authority and the Innovation Authority publish an article on the usefulness of natural language processing in the capital market



Ilan Gildin, Chief Economist and Strategic Advisor to the Chairman of the Securities Authority: “Natural language processing is a promising technology for the capital market and the research attacks this. In my view, the realization of the value inherent in the technology applications for the domestic market is only just beginning and will expand significantly in the coming years. Of the investor and in the effectiveness of the regulator’s supervision. ”

Aviv Zeevi, VP of Technological Infrastructure at the Innovation Authority: “The Innovation Authority considers the technological development of natural language processing in Hebrew an important pillar in the ability to integrate artificial intelligence as a realistic sub-field. “.

Securities Authority and Innovation Authority Publish an article on the impact of Natural Language Processing (NLP) technology on the capital market and the investing public. The article is the first in a series of articles that will be published as part of the Securities Authority’s activities to promote technological innovation in the capital market. The article is another milestone in realizing the vision that the Securities Authority is leading to implement technological innovation, in light of the opportunities it has for the investing public and the Israeli capital market.

Natural language processing technology enables the extraction of meanings from the analysis of large text repositories automatically and without the involvement of a human factor. Technology has two main advantages in channels in which securities are of great interest: Like other technological improvements, it streamlines work with text repositories and enables cost savings for both investors and traded corporations. In addition, the technology produces new capabilities that have a dramatic impact on how the regulator, corporations and investors monitor and consume the information. Some of these capabilities, for example, are reflected in the ability of NLP applications to “extract” information from publications on social networks and various public platforms, especially those that focus on capital market trading.

The encounter of new technologies with the capital market poses various issues and questions to the regulator. The main issue that arises from this meeting and is analyzed in the article concerns the ability of regulators to ensure that the markets function properly for private investors. In this prism, the technology enables investors to automate and streamline fundamental analysis, expand the range of companies and sectors that can be reviewed at a given time and also make the insights accessible to trading tools based on quantitative analysis. Second, technology enables investors to identify emotion expressed in real time in instant corporate announcements, news information and social media posts.

However, alongside the opportunities there are also threats. Thus, alongside effective “opinion mining” across the market, one can also see a risk involved in more public expression of false information, manipulative use and ‘matching’ reports to relevant NLP tools and more.

In addition to all these and in the regulator prism, the article reviews the benefits of using Suptech applications based on natural language processing. Thus, for example, NLP tools may streamline and improve the identification of unsupervised supervised reports and the disclosure of information in them is not optimal or does not comply with the requirements of the law. In doing so, they serve the core regulatory oversight of financial regulators. The transition in recent years to tagged financial reporting (IXBRL) in the global and local market, a project promoted by the Israel Securities Authority, is a supportive factor in the use of artificial intelligence tools in general and NLP in particular, thanks to its standardization, which helps analyze reports by computer.



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