Finance

Morgan Stanley rolls out OpenAI-powered chatbot for Wall Street division

Published

2 months ago

October 23, 2024

A screen displays the trading information for Morgan Stanley on the floor of the New York Stock Exchange (NYSE), January 19, 2022.

Brendan McDermid | Reuters

Morgan Stanley is expanding the use of OpenAI-powered, generative artificial intelligence tools to its vaunted investment banking and trading division, CNBC has learned.

The firm, which first rolled out an AI assistant based on OpenAI’s ChatGPT technology to its wealth management advisors in early 2023, began rolling out another version called AskResearchGPT this summer in its institutional securities group, according to Katy Huberty, Morgan Stanley’s global director of research.

The tool lets users extract answers from across the universe of Morgan Stanley’s research — including on stocks, commodities, industry trends and regions — collapsing what could otherwise be the cumbersome task of gleaning insights from the over 70,000 reports produced annually by the bank.

“We see it as a game changer from a productivity standpoint, both for our research analysts and our colleagues across institutional securities,” Huberty said in an interview. The tool helps staff “access the highest quality, most insightful information as efficiently as possible.”

Since its arrival as a viral consumer app in late 2022, OpenAI’s generative AI technology has been swiftly adopted by Wall Street’s largest players.

Morgan Stanley says that close to half of its 80,000 employees are using generative AI tools created with OpenAI, while at rival JPMorgan Chase, about 60% of the firm’s 316,043 employees have access to a platform using OpenAI’s models, said a person with knowledge of the matter. The San Francisco-based startup recently raised money at a $157 billion valuation.

OpenAI already has network advantages in financial services because of its ample funding and early focus on use cases for banks, said Pierre Buhler, a banking consultant with SSA & Co.

“They are ahead of everyone else in terms of market penetration,” Buhler said.”But it is an emerging market, and we are still at the very beginning.” It’s likely that competitors to OpenAI such as Anthropic will gain use over time, he added.

Viral hit

At Morgan Stanley, a leader in global investment banking and trading along with JPMorgan and Goldman Sachs, employees have gravitated toward AskResearchGPT, using it instead of getting on the phone or lobbing an email to the research department, Huberty said.

Employees are asking the tool three times the number of questions as compared to a previous tool based on traditional AI that’s been in use since 2017, according to the bank.

It’s most in-demand among salespeople and other client-facing staff who often field questions from hedge funds or other institutional investors, said Huberty.

“We found that it takes a salesperson one-tenth of the time to respond to the average client inquiry” using AskResearchGPT, she said.

Productivity boost

In a recent demonstration, the GPT-4 based chatbot was able to summarize Morgan Stanley’s position on matters from copper to Nvidia to the finer points of standing up a data center, understanding industry-specific jargon and providing charts and links to source material.

The bank wants to push adoption further in light of the productivity gains it’s seeing, Huberty said. The tool is embedded within workers’ browsers as well as Microsoft Teams and Outlook programs to make it readily available.

Understandably, Huberty says she is often asked if AI could ultimately replace the analysts who are creating the reams of research published under Morgan Stanley’s banner.

“I don’t see in the near future a path to just having the machine write the research report to generate the idea,” she said. “I really think that it’s humans who make the call and own the relationship, which is a really important part of the analyst job, or sales and trading job, or corporate banker job.”

Finance

Stocks making the biggest moves midday: AAL, AVGO, JPM

Published

13 hours ago

December 24, 2024

Business Finance News

Finance

Biggest banks planning to sue the Federal Reserve over annual stress tests

Published

16 hours ago

December 24, 2024

Business Finance News

A general view of the Federal Reserve Building in Washington, United States.

Samuel Corum | Anadolu Agency | Getty Images

The biggest banks are planning to sue the Federal Reserve over the annual bank stress tests, according to a person familiar with the matter. A lawsuit is expected this week and could come as soon as Tuesday morning, the person said.

The Fed’s stress test is an annual ritual that forces banks to maintain adequate cushions for bad loans and dictates the size of share repurchases and dividends.

After the market close on Monday, the Federal Reserve announced in a statement that it is looking to make changes to the bank stress tests and will be seeking public comment on what it calls “significant changes to improve the transparency of its bank stress tests and to reduce the volatility of resulting capital buffer requirements.”

The Fed said it made the determination to change the tests because of “the evolving legal landscape,” pointing to changes in administrative laws in recent years. It didn’t outline any specific changes to the framework of the annual stress tests.

While the big banks will likely view the changes as a win, it may be too little too late.

Also, the changes may not go far enough to satisfy the banks’ concerns about onerous capital requirements. “These proposed changes are not designed to materially affect overall capital requirements, according to the Fed.

The CEO of BPI (Bank Policy Institute), Greg Baer, which represents big banks like JPMorgan, Citigroup and Goldman Sachs, welcomed the Fed announcement, saying in a statement “The Board’s announcement today is a first step towards transparency and accountability.”

However, Baer also hinted at further action: “We are reviewing it closely and considering additional options to ensure timely reforms that are both good law and good policy.”

Groups like the BPI and the American Bankers Association have raised concerns about the stress test process in the past, claiming that it is opaque, and has resulted in higher capital rules that hurt bank lending and economic growth.

In July, the groups accused the Fed of being in violation of the Administrative Procedure Act, because it didn’t seek public comment on its stress scenarios and kept supervisory models secret.

CNBC’s Hugh Son contributed to this report.