AI Is Permanently Accelerating the Market Clock
TREE NEWS reports: Speaking at Galaxy Securities’ second Commodities Forum, Zhang Kun, head of the brokerage’s Innovation Investment Division, argued that artificial intelligence is systematically compressing the time it takes for information to flow through markets and for trading decisions to be made — a structural shift he believes will push market volatility to a permanently higher plateau.
“The market clock has been permanently sped up, and no one can turn it back,” Zhang said, describing how large language models now touch every link in the investment chain, from information acquisition to interpretation to execution. Processes that once required human discussion and gradual deliberation can now be compressed into near-instantaneous action, producing new patterns in both returns and volatility.
The Variance Gamma Framework
Zhang mapped this dynamic onto the Variance Gamma (VG) option-pricing model, which treats sudden, violent market swings as changes in the “speed of market time.” When market time accelerates, volatility accumulates faster per unit of calendar time, amplifying realized price moves. AI, he argues, has sped up information transmission, market reaction, and trade interpretation simultaneously — leaving objective time unchanged while sharply compressing the “market time” from information generation to pricing.
He expects algorithmic and programmatic trading to keep rising globally, noting that overseas programmatic trading may already account for roughly 60% of activity. Domestic quant strategies and commodity investors are likely to follow as new technology lowers barriers.
Three Structural Consequences
- Faster efficiency: Gains and losses now materialize far more quickly, producing the extreme dispersion and “one-step-to-completion” price action investors have felt this year.
- Endogenous drivers: While external factors like policy and geopolitics still matter short-term, internal market mechanics are becoming an independent force shaping new market characteristics.
- Homogenized thinking: As more capital runs similar programmatic logic, consensus crowding can breed bubbles — a second structural source of persistently elevated volatility.
Volatility as an Investable Asset
Zhang’s most provocative claim is that volatility itself has become an asset class. He cited the case of a major international airline that abandoned a decades-long fuel-hedging program, reportedly because rising crude volatility had made option premiums prohibitively expensive. In his reading, that hedging program had effectively been a long-volatility position all along — meaning the airline was not merely managing risk but actively participating in it.
Because volatility resembles a commodity cycle — range-bound rather than trending one-way forever — Zhang argues it demands professional management and appropriate financial tools. The next era’s investor framework, he suggests, may layer volatility strategies on top of core positions, dynamically switching between buying and selling options based on where volatility sits in its long-term range.
AI Cannot Replace Judgment
Zhang is careful to separate analysis from decision-making. AI has already penetrated information gathering and interpretation, and those tasks will likely be automated. But the ability to identify the single best option among a sea of AI-generated proposals remains scarce and human. He invoked Liu Cixin’s sci-fi story “The Poetry Cloud,” in which an alien civilization exhaustively composes every possible poem yet cannot judge which is best — a parable for a world where options are abundant but discernment is not.
He also flagged a coming “knowledge equalization,” in which barriers to acquiring knowledge dissolve — making control of new means of production the decisive competitive advantage. Galaxy Securities’ Innovation Division, he said, is already applying AI to strategy research and execution and packaging internal expertise into MCP services for external volatility-tool support.
Key Takeaways for Investors
- Expect structurally higher volatility across equities, commodities, bonds, and crypto as AI compresses decision cycles.
- Treat volatility as an asset to be managed, not merely a risk to be avoided — consider options overlays and dynamic hedging.
- Watch for crowding risk as quant strategies converge on similar logic.
- Human edge shifts from analysis to judgment and direction-setting.
