Artificial Intelligence Software for Financial Markets

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Index

6. What do we use to capture trends ?

12 7. Our system

14 8. AI system Vs Automated

15

1. Fintechs 4

9. How the system works

17

2. Who is Deep Mind Fintech?

9

3. Why does Deep Mind Fintech work on Asset Management area ?

4. Why this side is important for us ?

5. Why Trends ?

10. Where do we fit in this universe ?

12. Apendix

7

8

11

18

6

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Disclaimer

Nothing contained in this document should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any service, investment or to engage in any other transaction. Deep Mind offers a number of products and services designed specifically to cover various categories of needs in various countries and regions. Not all products will be available to all clients. The products or services offered by Deep Mind are only offered to clients in those countries and regions in accordance with applicable laws and regulations. The information provided in herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. This document is not directed to any person in any jurisdiction where the publication or availability of our services is prohibited, by reason of that person's nationality, residence or otherwise. Persons under these restrictions must not receive this document. Some services may not be available to certain clients due to regulatory or other constraints elsewhere. You are advised that most services are only available following completion of the Deep Mind Agreement and/or any other relevant documentation as required by the Company from time to time.

Disclaimer

4/27 Confiden'al

1. FinTechs: a disruptive technology creating a new business model

ü  Financial industry is suffering dramatic changes in its foundations due to the following issues:

v  New consumer behaviour requirements.

v  New technology processes.

v  New market conditions.

ü  Disruptive technologies are overcoming the traditional banking model.

ü  Something interesting is happening, and it is causing banks and other financial services to rethink how they are doing business.

ü  Almost every type of financial activity — from banking to payments to wealth management and more — is being re-imagined by FinTechs or IT firms.

ü  Meanwhile, the old guard is trying to solve a puzzle presented by the fintech revolution: How can they benefit from the rise of digital, and how can they avoid obsolescence? 

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1. FinTechs: a disruptive technology creating a new business model

ü  A concern is recognized by 90 percent of banking executives

v  Less than one quarter feel they have an advantage over Fintech firms in terms of agility or ability to innovate to address these new challenges.

ü  Responding to the threat these traditional banks react as

follows:

v  Nearly two-thirds of bank executives say they need to view FinTechs as partners in two ways:

²  Strategies searching the form of collaboration (46

percent)

²  Strategies looking for an investment (44 percent). ü  Banks and FinTechs have strengths that are complementary.

v  While FinTechs excel in agility, innovation and exploiting new technology,

v  Banks offer capital, deep customer bases and expertise in working with regulators.

ü  Banks will only be able to achieve their full growth potential by fully accepting the growing role of FinTech providers and creating pathways to work with them as the digital financial network continues to evolve.

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2. Who is Deep Mind FinTech?

Deep Mind Fintech( DMF ) is a Fintech company which develops Artificial Intelligence ( AI ) models for the financial markets. In which part of the financial markets is working Deep Mind Technologies ? v  DMF is working on the Asset Management area helping asset

managers to create value.

How is DMF delivering value in the Asset Management area ? v  By developing AI models to profit from financial markets

movements.

How many years of experience does DMF have in this field ? v  More than 20 years of experience in AI models for Asset Managers.

Is DMF delivering services to financial players nowadays ? v  Yes. DMF is working and developing services to institutional and

Family Office investors.

Does DMF develop customize AI models ? v  Yes

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3. Why Does Deep Mind Fintech work in the asset management area?

ü  Within the fintech ecosystem

firms which deliver its expertise i n t h e F I N A N C I A L MANAGEMENT area are less than 5%

ü  Even more; we differentiate two main areas:

v  One based on Investor Data or

behaviour.

v  Other based on Market data or m o v e m e n t s t h a t r e fl e c t s investors behaviour.

W e f o c u s o n l y o n M A R K E T B E H A V I O U R o r M A R K E T MOVEMENTS.

ü  In this field we have no more than 3% of competitors, and even less using AI systems to help asset Managers to create Alpha.

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4. Why this side of Financial markets is important to DMF ?

ü  Financial markets are typically defined by having transparent pricing, basic regulations on trading, costs and fees which helps to drive human emotions.

ü  These emotions, creates movements or trends for each security, index or market.

ü  DMF analyze, through AI models, these movements to associate and learn patterns in order to anticipate trends and help asset managers to create value on their portfolios.

ü  Our main goal is being a complement to asset managers on creating value or alpha.

FinancialMarkets

BondMarket

StockMarket

ForeignExchange

Deriva'vesMarket

Over-the-Counter

OtherMarkets

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5. Why Trends ?

ü  DMF focus on the movements created by the investors

behaviour.

ü  All these movements create TRENDS.

ü  And in the financial markets “THE TREND IS YOUR FRIEND“.

ü  A trend can apply to equities, bonds, commodities and any other

market which is characterized by a movement in price and

volume.

ü  Trend trading is one of the most effective method for making

money in the market.

ü  Trend trading success depends on identifying and catching the

trend after it has started and exiting as soon as possible after

the trend reverses.

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5. In which market does DMF capture trends ?

ü  DMF is able to analyse any market, equity , index, bond or commodity as

long as has enough liquidity and financial players.

ü  As much liquidity and players the better for the AI model to capture

trends.

ü  DMF is able to customize its neural network to investors needs according to eligible assets.

ü  DMF have proved its neuronal network with many indexes and with the

largest asset class in the world. Currencies.

v  its enormous trading volume representing the largest asset class

in the world leading to high liquidity. More than 4 trillion daily.

ü  It is the closest example to a perfect market in terms of liquidity and

players. As a result, MARKET MOVEMENTS AND TRENDS are more

“pure” and less distorted.

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6. What do we use to capture Trends?

•  Along with more than 20 years of experience, we use an

Artificial Intelligence system to identify market trends.

•  Our experience covers the following stages:

①  Studying the market

②  Creating the artificial neural network ( ANN )

③  Improving or updating it.

④  Managing the ANN

⑤  Creating the deep learning mode process

•  Our AI system3 formed by neural networks4 with many layers is able to recall and analyse facts of its

environment, with the aim of using them for proper decision making. And over time, learn from its

environment, accumulating experience and using it in new situations that market presents.

•  The software already has a database of 45,000 probed strategies, and this figure continuous growing as a

result of its deep-learning capability.

•  Its deep learning mode, gives us the opportunity to recognize new trends every week.

3 www.euromoneythoughtleadership.com/ghostsinthemachine.AIforfinancialmarkets4 Neural Networks : Redes Neuronales Artificiales. www.electronica.com.mx/neural

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7. Our AI system: Some Advantages

Some advantages of having an AI system for trading: v  Real time strategies for market trends The AI system analyses every week the best strategies; among 45,000; to adapt constantly the system to the market trends. v   Real time reaction The system analyses in real time which is the best strategy; from the previously selected; for that trend.

v  Deep Learning mode Our AI system is able to recall and learn from the market and its environment to apply solutions to infer future trends. v  Counter Strategy Mode Once a strategy is selected, the system calculates in real time other strategy to recover the previous one in case of mismatching trends. v  Minimize Emotions  Since trade orders are executed automatically once the trade rules have been met, traders will not be able to hesitate or question the trade.

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v  Preserve Discipline  Discipline is often lost due to emotional factors such as fear of taking a loss. AI trading helps ensure that discipline is maintained because the trading plan will be followed exactly. v  Improved Order Entry Speed  AI systems are able to generate orders as soon as trade criteria are met. Getting in or out of a trade a few milliseconds earlier can make a big difference in the trade's outcome. v  Diversify Trading  The system is able to scan for trading opportunities across a range of markets, generate orders and monitor trades.  v  Ability to Back test  Back testing allow us to probe market strategies millions of times before using it on the market. v  Optimization process Our ANN runs millions of times the strategies to optimize the results

7. An AI system: Some Advantages

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8. An AI system: comparison with traditional trading

Characteris6cs Ar6ficialIntelligence AutomatedSystems

RealTimemarketanalysis Yes No

Crea6ngnewstrategies Yes No

Counterstrategymodeinreal6me Yes No

Selec6ngthebeststrategiesconstantly Yes No

Adap6ngstrategiestonewmarketcondi6ons Yes No

Deeplearningmode Yes No

Selectedstrategyop6miza6on Yes No

Systemcustomiza6ontoobtainrequiredoutputs Yes No

NewpaMernrecogni6on Yes No

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Super Computer

Market Data

COUNTER STRATEGY MODE Super Computer II

for extreme volatility events

Strategies Database A Strategies Database B

The Main program calculates in real time the accumulation signal points. These points show us the trends in the markets. The program is based on AI to learn and optimise the market situation. Our Neural networks is applied in the program.

All the strategies are run in real time to identify the best ones for the current market situation. At the same time the program learns from the results and the environment to create new strategies and patterns.

Investor A Investor B Investor C Investor D Investor E

Selected strategies are applied to the investors If for any reason a d i s r u p t i v e e v e n t emerges and harms the strategy while executed, the SUPER COMPUTER II calculates in REAL TIME a counter strategy to solve the situation. The Super Computer is continuously analysing the best strategy to overcome an extreme event.

8. An AI system: how does our system work

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All the strategies are created to profit form trends. All of them are based on knowledge as:

ü  Macroeconomic analysis.

ü  Candle graphs5

ü  Technical Analysis6

ü  Chaos theory7

ü  Fractals theory8

ü  Computing knowledge

ü  Artificial Intelligence knowledge

ü  Neural Networks...

ü  Deep learning procedures Return is completely explained by the manager experience applied to the system, what is known as ALPHA.9

5,6,7,8,9 See appendix for more information.

PURE ALPHA CURRENCYMAJORS

MACRO

CANDLEGRAPHS

CHAOSTHEORY

TECHNICALANALYSIS

FRACTALSTHEORY

9. An AI system: behind the strategies

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ü  Investors have two main investment strategies that can be used

to generate a return on their investment accounts: active and

passive portfolio management .

ü  Active portfolio management focuses on outperforming the

market compared to a specific benchmark, while passive

portfolio management aims to mimic the investment holdings of

a particular index.

ü  We believe in both. And therefore, a CORE – SATELLITE style

which embraces different styles is in our opinion a good path to

create value.

ü  Within this strategy, we CREATE VALUE on the satellite portfolio

which is managed on an active mode by our AI system.

ü  Our AI system is a perfect complement to those portfolios who

desire to be active managed.

10. Where do we fit in the universe of management styles ?

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12. Appendix

0.- Efficient Market Hypothesis. Mr . Eurgene Fama. "The behavior of stock-market prices." Journal of business (1965): 34-105. 1.- Leverage for the Long Run A Systematic Approach to Managing Risk and Magnifying Returns in Stocks Michael A. Gayed, CFA and Charles V. Bilello, CMT 2016 Charles H. Dow Award Winner 2.- Reconciling Efficient Markets with Behavioural Finance: The Adaptive Markets Hypothesis By Andrew W. Lo, Ph.D. PUBLISHED BY THE INVESTMENT MANAGEMENT CONSULTANTS ASSOCIATION 3.- Neural Networks www.electronica.com.mx/neural 4.- Artificial Intelligence for Financial Markets : Ghost in the Machine Artificial intelligence, risks and regulation in financial markets Editor: Tom Upchurch Writer: Denis McCauley Designer: Claire Boston www.euromoneythoughtleadership.com/ ghostsinthemachine 5.- Candle Stick Japanese Candlestick Charting Techniques by Steve Nison. 6.- Technical Analysis Gordon, John Steele. “The Man Behind Modern Math". 7, 8 –Chaos Theory & Fractals The Fractal Geometry of Nature, by Benoît Mandelbrot; W H Freeman & Co, 1982; ISBN 0-7167-1186-9 9- Seeking Alpha. Using Sentiment to Create Theme-based Alphas By: Peter Hafez Director of Quantitative Research at Raven Pack Jose A. Guerrero-Colón Quantitative Analyst at Raven Pack

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13. Contact

WWW.DEEPMINDFINTECH.COM