Collaboration between London Stock Exchange Group and Microsoft to create advanced AI models

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The London Stock Exchange Group is collaborating with Microsoft and multiple banks to develop unique generative artificial intelligence models. This initiative showcases how the financial services industry is striving to utilize AI while maintaining data privacy.

Last year, the introduction of OpenAI’s ChatGPT sparked significant interest in generative AI. Although financial services companies acknowledge the potential benefits, they are cautious about providing confidential information to models that continuously learn from data.

David Schwimmer, CEO of LSEG, mentioned that the company is working with Microsoft to create “bespoke large language models.” He stated, “We are exploring opportunities for customers to securely combine their data with our extensive available data.” These remarks were made during the release of LSEG’s first-half results.

In December of last year, Microsoft acquired a 4% stake in LSEG and obtained a board seat, establishing a 10-year strategic partnership. This move exemplifies the increasing involvement of Big Tech in global capital markets. Microsoft also made a $10bn investment in OpenAI in January.

Schwimmer added that generative AI is particularly valuable for banks with substantial proprietary data, as it allows them to develop trading strategies and manage risks without compromising the use of their data for other language models. However, Schwimmer did not disclose the names of the companies partnering with LSEG.

LSEG, facing a lack of listings in London, sees AI-related products as a potential new business line. The company has expanded its presence in the financial data sector since acquiring Refinitiv for $27bn.

Michael Sanderson, equity research director at Barclays, expressed that leveraging LSEG’s extensive data for enhanced financial analysis is where AI can generate substantial value. He added, “This potential for value creation applies not only to key clients, but also to LSEG itself.”

On Thursday, shares of the 300-year-old exchange operator initially fell up to 6%, but later recovered to trade 1.4% lower after reporting mixed first-half earnings. While operating profit increased by 0.7% to £1.4bn, the growth of LSEG’s data subscriptions slowed. Revenues from the equities business, which includes stock market listings, declined 11% to £116mn compared to the same period last year due to a lack of initial public offerings.

Schwimmer commended the UK government’s reforms aimed at enhancing London’s capital markets, which include changes to listing rules and initiatives to direct pension fund investments towards high-growth companies. He expressed optimism about London’s increased competitiveness as a result of these reforms.