ML-Driven HFT Dominance
By the mid-2020s, algorithmic and high-frequency trading firms handled roughly 60 to 70 percent of US equity volume. Many now rely on machine-learning models retrained on intraday data. Their systems adjust quotes in microseconds based on patterns human analysts cannot articulate. Firms like Citadel Securities, Virtu, and Jane Street intermediate a large share of retail orders. The SEC's Reg SCI governs exchange infrastructure. The models themselves sit inside private trading firms, where direct regulatory inspection is limited.
The SEC's Regulation Systems Compliance and Integrity (Reg SCI) governs exchange infrastructure but does not directly regulate the AI models themselves. The gap is structural: regulators can inspect the pipes, not the traders inside them.
08 · AI Trading
AI systems are trading trillions. Large language models are reading news feeds and adjusting positions in milliseconds. No specific federal framework governs this class of behavior. The largest regulatory gap in financial history is being created in real time — and it is on track to be the longest-lived.
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