Bubble, Bubble, AI’s Rumble: Why Global Financial Regulatory Incident Re-Porting Is Our Shield Against Systemic Stumbles

"Double, double toil and trouble; Fire burn and cauldron bubble." As Shakespeare's witches foretold chaos through cryptic prophecies, modern capital markets grapple with systemic risks concealed by opaque AI systems. According to the IMF, the August 5, 2024, plunge in Japanese and U.S. equities can be linked to algorithmic trading, yet absent from the existing AI incidents database, exemplifies this transparency crisis. Current AI incident databases, reliant on crowdsourcing or news scraping, systematically overlook capital market anomalies, particularly in algorithmic and high-frequency trading. We address this critical gap by proposing a regulatory-grade global database that synthesises post-trade reporting frameworks with proven incident documentation models from healthcare and aviation. Our framework's temporal data omission technique masks timestamps while preserving percentage-based metrics, enabling sophisticated cross-jurisdictional analysis of emerging risks while safeguarding confidential business information. Synthetic data validation (modelled after real life published incidents) (n=2,999 incidents) reveals compelling patterns: systemic risks transcending geographical boundaries, market manipulation clusters distinctly identifiable via K-means algorithms, and AI system typology exerting significantly greater influence on trading behaviour than geographical location, This tripartite solution empowers regulators with unprecedented cross-jurisdictional oversight, financial institutions with seamless compliance integration, and investors with critical visibility into previously obscured AI-driven vulnerabilities. We call for immediate action to strengthen risk management and foster resilience in AI-driven financial markets against the volatile "cauldron" of AI-driven systemic risks, promoting global financial stability through enhanced transparency and coordinated oversight.

Authors

Institutions

Publication Details

Journal
Proceedings of the AAAI/ACM Conference on AI Ethics and Society
Published
2025-10-15
DOI
https://doi.org/10.1609/aies.v8i2.36621
Primary Topic
Global Financial Regulation and Crises
Type
article
Field-Weighted Citation Impact
0.00
Controls
|||
ALL TIME
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
article

Bubble, Bubble, AI’s Rumble: Why Global Financial Regulatory Incident Re-Porting Is Our Shield Against Systemic Stumbles

James T. Kwok, Anish Gupta, Gleb Papyshev
Proceedings of the AAAI/ACM Conference on AI Ethics and Society
Global Financial Regulation and Crises
article

Bubble, Bubble, AI’s Rumble: Why Global Financial Regulatory Incident Re-Porting Is Our Shield Against Systemic Stumbles

James T. Kwok, Anish Gupta, Gleb Papyshev
article en

Abstract

No abstract available for this paper.

Proceedings of the AAAI/ACM Conference on AI Ethics and SocietyVol. 8(2)
Lingnan University (HK), Hong Kong University of Science and Technology (HK)
Openalex Percentile: Top 62%
Global Financial Regulation and Crises
AI Navigator

Ask Laika to Summarize, Analyze, and Connect papers live on the map.

Summarize Papers & Methodologies

Extract key findings, datasets, and comparative methods across publications.

Benchmark Rankings & Visual Analytics

Rank top research institutions, authors, funders, topics, and journals by Field-Weighted Citation Impact (FWCI) and paper volume with instant charts.

Connect Distant Disciplines

Bridge topological clusters on the map to find hidden collaborative intersections.