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Nasdaq chief says machines will never fully replace humans in trading


Machines will never fully replace humans in market trading, the head of Nasdaq has said at a Yahoo Finance event at Davos.

Adena Friedman, president and CEO of the leading stock exchange, said it was vital to remember that all algorithms and indexes start with a “fundamental choice” by a human being.

She told the audience at the panel event on automated markets: “The markets have been and will always be a combination of humans and machines.”

She said she was a “firm believer” that if the market swung too far towards automation, human decision-making and judgement would inevitably be drawn back the other way.

READ MORE: What is Davos? The 2019 World Economic Forum explained

Friedman warned at the Davos event, moderated by Yahoo Finance editor-in-chief Andy Serwer, that automation had now added an extra level of complexity or “mystery” to trading, which investors had to keep in mind.

She said about 7-10% of trading in US stocks now occurred on the close and that about 20-25% of US equities were passively owned.

She also told the panel human advisors were likely to remain important in the industry, rather than being displaced by automation.

Friedman added: “The role of advisor is fundamentally changing, but I don’t think it will necessarily disappear.

“They are fundamentally changing into more long-term advisors how you allocate assets over the long-term to manage for life events.

READ MORE: Ray Dalio reveals at Davos what he fears most

“Not every person in the world has a full understanding of how to interact with markets and make those choices by themselves.

“However, individual stock decisions or fund decisions and other things it’s likely these large, scaled advisory firms and wealth management firms will use technology to make those individual choices.”

The comments came in a discussion event on automated markets hosted by Yahoo Finance at the World Economic Forum (WEF) for global business and political leaders in Davos, Switzerland.

Other panelists included General Atlantic CEO William Ford, Royal Bank of Canada president and CEO David McKay and Ontario Teacher’s Pension Plan CEO and president Ron Mock.

READ MORE: Davos founder warns of battle between robots and humankind