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Home » Daily Briefing » Daily briefing - 9 January 2017

Daily briefing - 9 January 2017

The Financial Times runs a fascinating Big Read today about collusion and anticompetitive behaviour in a world when computers have increasing levels of autonomy. Antitrust laws prepared in the early 20th century to deal with cartels in the oil and steel businesses assume human actors are involved. But trading in the early 21st century is increasingly dominated by computers, and those computers are running algorithms and software that depends on machine learning — so the computers may start making trading decisions by themselves. Can legislation written for humans be applied to computers? The FT writes: "We're talking about a velocity of decision-making that isn't really human," says Terrell McSweeny, a commissioner with the US Federal Trade Commission. "All of the economic models are based on human incentives and what we think humans rationally will do. It's entirely possible that not all of that learning is necessarily applicable in some of these markets."

Speaking of that, Lafferty News believes that 2017 will see the social acceptance of the big digital and social networks start to fade, as the biggest internet players find increased resistance to their dominant position. Google and Facebook are being forced to answer hard questions about data and data protection given their absolute domination of the digital advertising business. The New York Times ran a story over the weekend stating that data could be the next tech hot button for regulators — though in truth this story is already well underway in Europe, where regulators are insisting that data on European citizens is stored in Europe rather than the US. This story of course has wider implications for privacy, as it was the Snowden leaks that accelerated the EU's interest in whose data goes where. Take this sentence from the NYT story: "Fei-Fei Li, director of the Stanford Artificial Intelligence Laboratory, is taking a sabbatical to become chief scientist for artificial intelligence at Google's cloud unit. She sees working at Google as one path to pursue her career ambition to "democratize A.I.," now that the software and data ingredients are ripe." The idea that Google, Facebook et al are interested in "democratising" AI is comical at best, but it's an honest indication of what's on the minds of their executives as they try to protect their businesses.

UK Business Insider writes that banks are getting alarmed about the potential cost of the FRTB or Fundamental Review of the Trading Book regulations, which will come into effect in 2019 as part of reforms by the Basel Committee on Banking Supervision. The site cites an Oliver Wyman report which suggests that banks have underestimated the costs involved and are now looking at an overall cost of £5 billion. The low end estimates for banks last year was $43 million to $129 million apiece — but that's now climbed to between $100 million and $200 million. "Last year, banks were in the early stages of costing," said Oliver Wyman's Aude Schonbachler. "Some of them clearly misunderstood how big the effort would be."

Brexit and uncertainty update: UK Prime Minister Teresa May gave her first major interview on Brexit this weekend, telling Sky News that "[Often] people talk in terms as if somehow we are leaving the EU, but we still want to keep bits of membership of the EU," she said. "We are leaving. We are coming out." Analysts understood this remark to mean that the UK will be looking at Hard Brexit, and the pound "slumped across the board" on foot of the remarks when trading opened on Monday morning. Meanwhile, UK foreign secretary Boris Johnson flew to the US to meet president-elect Donald Trump. Prior to Trump's election, Mr Johnson described Mr Trump as ""clearly out of his mind" and "betraying a quite stupefying ignorance that makes him unfit to hold the office of president of the United States".

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