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43 U. Pa. J. Int'l L. 79 (2021-2022)
Machine Learning, Market Manipulation, and Collusion on Capital Markets: Why the "Black Box" Matters

handle is hein.journals/upjiel43 and id is 83 raw text is: MACHINE LEARNING, MARKET MANIPULATION, AND COLLUSION ON CAPITAL MARKETS: WHY THE BLACK BOX MATTERS ALESSIO AZZUTTI*-WOLF-GEORG RINGE**- H. SIEGFRIED STIEHL*** ABSTRACT This Article offers a novel perspective on the implications of increasingly autonomous and black box algorithms, within the ramification of algorithmic trading, for the integrity of capital markets. Artificial intelligence (AI) and particularly its subfield of machine learning (ML) methods have gained immense popularity among the great public and achieved tremendous success in many real-life applications by leading to vast efficiency gains. In the financial trading domain, ML can augment human capabilities in price prediction, dynamic portfolio optimization, and other financial decision-making tasks. However, thanks to constant * PhD Candidate in Law; Research Associate at the Institute of Law & Economics, University of Hamburg. * Professor of Law and Finance; Director of the Institute of Law & Economics, University of Hamburg; Visiting Professor, University of Oxford. * Senior Professor at the Department of Informatics, University of Hamburg. We are grateful for comments on earlier drafts of this paper by Pedro Batista, Maria Grigoropoulou, Christopher Ruof, and Roee Sarel, as well as participants at the Singapore Management University School of Law's workshop on Al and Fintech, the Chinese University of Hong Kong Faculty of Law's Conference on FinTech, the University of Hamburg/National Taiwan University Conference on Law and Technology, the Italian Society of Law & Economics' 15th Annual Conference, the European Banking Institute's 2020 Global Annual Conference on financial regulation, the Wharton School of the University of Pennsylvania's Conference on financial regulation, the European Centre of Excellence on the Regulation of Robotics & AI's 2021 Conference on Al regulation, and the Asia-Pacific and Europe Law Institutes Alliance's 2021 Conference on Al and international law. Funding from the Hamburg Law, Finance, and Technology project, sponsored by Joachim Herz Foundation, is gratefully acknowledged (https://LFT.ile-hamburg.de). 79

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