Navigating market abuse in the age of AI. Reimagining criminal responsibility in algorithmic trading

The essay delves into the intricate relationship between algorithmic trading (AT), artificial intelligence (AI), and the EU Market Abuse Regulation (MAR) within the financial realm. It argues that many practices of AT, driven by sophisticated AI algorithms, may potentially violate MAR due to their manipulative nature. The discussion navigates through various AT strategies, including high-frequency trading (HFT) strategies such as “stuffing”, “spoofing”, and “front running”, highlighting their disruptive impact on market integrity. Furthermore, the essay addresses the challenges in attributing criminal responsibility amidst the complex interplay of human agency and AI autonomy. It emphasises the need to reconsider traditional notions of criminal liability in the context of AI-driven financial activities. The essay contends that while existing regulations attempt to curb manipulative practices, they fall short in addressing the inscrutability of AI decision-making mechanisms, posing significant hurdles in proving criminal intent. In short, this chapter advocates for a nuanced approach to regulation, prevention, and investigation of AT and HFT practices, acknowledging the technological complexities involved. It raises thought-provoking questions regarding the distribution of criminal responsibility between human operators and AI algorithms, challenging conventional legal frameworks. Ultimately, the essay prompts a critical reflection on the evolving role of technology in financial markets and underscores the imperative for legal adaptation to ensure market integrity and accountability in an era dominated by AI-driven trading strategies.