Algorithms & Market Automation Ushering Out Traders Permanently


Oh Boy! If you are a coder or a math wizz your sun could never be brighter. BUT, if you are a trader (why are you still here) your sun is setting…..permanently. Seems that we are just in the first or second inning (baseball talk) of markets becoming totally automated and money management being given over to algorithms and “robots”. Is this good? Well, as investors, clients, firms, etc become more trusting and used to the speed and lower cost structure THEY will think its good. Artificial intelligence is ushering in a whole new era in financial markets. But hey, humans will still be needed (maybe not traders) to polish the new machines and “change the oil”.
(Bill Taylor/CEO)

“We are still in the tail of the third industrial or digital revolution where investment in digitalisation could drive significant productivity gains,” noted analysts from investment bank Morgan Stanley in a September 2016 report entitled Disruptions and productivity growth in the next decade of the digital revolution.

The digital revolution represents the move towards data-driven business. The computerisation of business is continually generating vast quantities of data. That information is fuelling the use of automated decision-making systems within finance.

“I am very optimistic about where we are going,” says John Lowrey, global head of electronic markets in equities at Citi, the banking giant. “Training artificial intelligence systems requires large datasets. Those who have the most data are the most able to adapt to the new environment and of course the banks and investment banks have reams of data. By 2020 we will really see radical change in the environment.”

That change is very apparent in capital markets. While many people still think of traders as brightly jacketed men shouting in a trading pit, and a few think of men and women staring at screens while shouting into telephones, very few people picture a computer server clicking away, making millions of decisions.

This move towards automated trading, which began in the late-1990s and early-2000s, across the banking and asset management environment was driven by two factors. Firstly, traders cost a lot of money and are fallible, and so reducing their number reduced costs. Secondly, many of their simpler tasks were time consuming and ate into their ability to tackle complicated problems…”