London Stock Exchange Group teams up with Microsoft to develop AI models

The London Stock Exchange Group is working with Microsoft and several banks to create bespoke generative artificial intelligence models in a move that shows how the financial services industry is looking to harness the technology without exposing proprietary data.

The launch of OpenAI’s ChatGPT last year spurred a wave of interest in generative AI and while many financial services companies are interested in its potential benefits, they are wary of inputting confidential information in the models, which continually learn from the data they are given.

David Schwimmer, chief executive of LSEG, said the company was working with Microsoft to create “bespoke large language models”. 

“We are having conversations with customers about the opportunity for them to use the vast amount of data we have available, to commingle that with their data in a secure proprietary [manner],” he said, as the exchange and data group reported first-half results on Thursday.

Microsoft took a 4 per cent stake in LSEG in December last year and secured a board seat as part of a 10-year strategic partnership, marking the latest in a series of incursions by Big Tech into the operation of global capital markets. Seattle-based Microsoft also invested $10bn in OpenAI in January.

Schwimmer said generative AI was useful “if you are a big bank that has a lot of proprietary data that you want to use and get access to . . . for your own trading strategies, risk management”.

Banks were interested in creating their own generative AI models because they “want to make sure that none of [their] data is being used to inform any other large language models out there”, he added. Schwimmer did not name the companies that LSEG is working with.

The UK exchange operator, which is suffering from a dearth of listings in London, regards AI-related products as a potential new business line. LSEG has pushed deep into the financial data business since its $27bn acquisition of Refinitiv.

Michael Sanderson, equity research director at Barclays, said that using LSEG’s vast data to create enhanced financial analysis meant “that’s where a lot of AI is going to be valuable”.

“There clearly is a value creation potential for the key clients but also for . . . LSEG alongside them,” he added.

Shares in the 300-year-old exchange operator dropped as much as 6 per cent on Thursday before recovering to trade 1.4 per cent lower after the company reported mixed first-half earnings.

Its operating profit edged up 0.7 per cent to £1.4bn, but growth in the company’s data subscriptions slowed. Revenues at LSEG’s equities business, which includes stock market listings, fell 11 per cent to £116mn compared with the first six months of last year amid a scarcity of initial public offerings.

Schwimmer welcomed the UK government’s series of reforms aimed at making London’s capital markets more competitive, including changes to listing rules and efforts to channel pension fund money towards high-growth companies.

“We feel very positive about the direction of travel and think it will position London to be that much more competitive going forward,” he said.