JSE to enlist AI ‘spies’ in fight against corporate crooks
● The JSE will invest in artificial intelligence to help it crack down faster on insider trading and transgressions by listed companies.
CEO Leila Fourie said this week the local bourse was “investing heavily in artificial intelligence”, with which machines could mimic some human cognitive functions.
SA has had a spate of recent corporate disasters, among them the collapse of Steinhoff and the alleged fraud at Tongaat Hulett.
Fourie told Business Times this week that artificial intelligence “will enable us to do social listening”.
“That gives us early warning indicators on where there is dissent, concerns or comments that are made which trigger a need to do early investigation into potential corporate issues.”
Fourie, who took over from Nicky Newton-King four months ago, was speaking after the release of the JSE’s results for the year to December 2019.
The JSE’s artificial intelligence initiative, called Smart Regulation, aims to enable the consolidation of multiple sources of information in the JSE into a cloud-based storage system.
“A quick-access tool is in the process of being developed that will allow the division [responsible] to search all the aggregated data in a manner similar to a Google search engine on a real-time basis,” Fourie said.
“The development will later allow for the aggregation of external sources of information as well, such as social media, news feeds and legal proceedings which involve listed companies.”
The JSE said “business intelligence rules, combined with machine-learning algorithms” will also be created to proactively assess the “health status” of a listed company at any time.
In the US, the Nasdaq said last year it had introduced artificial intelligence to keep its stock market under surveillance. The JSE monitors breaches of listing requirements and can impose penalties, such as public or private censure, fines and delinquent director status with regulators and law enforcement agencies.
In terms of the JSE’s growth strategy, Fourie is eyeing the expansion of the small and medium enterprise (SME) sector as a potential pipeline for listings and income. These would be enterprises not large enough to list on the JSE’s AltX, an exchange for companies with share capital of about R2m.
Ian Cruickshanks, chief economist at the Institute of Race Relations, said expansion plans for the SME sector could flourish provided they revisited onerous listing requirements. “We have de-risked the market out of existence, almost.”
David Shapiro, deputy chair at Sasfin Securities, said it would be tough to find goodquality SMEs to list.
He said that to an extent the JSE was to blame for a decline in listings because it “chased money and institutions” instead of nurturing the listing of smaller companies. “There’s a whole lot of existing businesses that could do with a little bit of her love.”
A lot of businesses could do with a little bit of her love
David Shapiro
Deputy chair at Sasfin Securities