Bank of England deputy governor Sarah Breeden warned that firms using AI‑powered trading could trigger market turmoil if systems misbehave. She said regulators may need a kill switch to halt trading when autonomous algorithms produce runaway volatility. The concern grew after several high‑frequency desks deployed models that learn and adapt in real time.

Breeden highlighted herding behavior as AI agents respond similarly to identical market cues, amplifying swings during stress periods. She noted the Bank of England is collaborating with Germany’s Bundesbank, the Basel‑based Bank for International Settlements, and the European Central Bank to map the risk. Their studies seek guardrails analogous to circuit breakers that could be triggered by faulty models.

The IMF’s Tobias Adrian cautioned that kill switches may fail in less liquid or over‑the‑counter venues, while Professor Itay Goldstein warned that AI traders can collude without overt communication, eroding market fairness. He cited experimental work showing autonomous agents learn to coordinate profit‑maximising strategies.