If you work in trading, you might be feeling pretty perky right now. Maybe you think Gary Cohn is going to bring back prop trading? Maybe you think the normalizing U.S. rate environment and erratic Trump tweets are an opportunity? Before you get too enthusiastic, you might want to temper your excitement with a look at what you're up against. The new generation of artificially intelligent (AI) trading systems are coming to eat your lunch.
Take Sentient Technologies, a secretive company that has spent the past decade training an AI system that Bloomberg says can, 'scour billions of pieces of data, spot trends, adapt as it learns and make money trading stocks.' This might sound pretty standard for a 21st century AI trading machine, but it's the manner in which Sentient sets about the task that makes human traders look horribly inadequate. Having scrutinized Sentient's patents, Bloomberg says it has, 'thousands of machines running simultaneously around the world, algorithmically creating what are essentially trillions of virtual traders that it calls "genes."' Sentient gives these genes hypothetical sums of money to trade in simulated situations based on historical data. If they genes are successful, they go on to the next generation. If they're not, they die.
"Sentient can squeeze 1,800 simulated trading days into a few minutes," Bloomberg observes, adding, "The AI system evolves autonomously as it gains more experiences..."
It's still early days. Sentient doesn't share enough data to reveal whether the system is practical and it has its (human) detractors. At some point, however, the ability to automatically back test trading strategies against years of data and to automatically develop new and better strategies in the process, will surely take off. The potential repeal of the Volcker Rule may even spur AI's advance. - After all, there aren't that many risk-taking human traders left these days.
Separately, finance jobs are moving to London. Reuters reports that Credit Suisse has decided to move its Dutch investment banking team to London from Amsterdam in the interests of improved efficiency and profitability. Supporters of Brexit are vindicated. Except, Credit Suisse is relocating the whole of six jobs and has already cut 64% of its staff in London in the past 12 months.
It sounds like Gary Cohn does want to repeal the Volcker Rule: "We want markets that function." (Gadfly)
The “easiest part of Dodd-Frank to eliminate” should be the Volcker Rule on proprietary trading, which would eventually allow financial firms to gain $6 billion from trading activities. (Financial News)
Paris thinks 10,000 finance jobs will move there from London post-Brexit. (Financial News)
Trump's proposed changes to H1-B Visas are no big deal. More than 90% of 2015 visa applications for software developer positions filed by Facebook, Google, Apple, and Microsoft paid more than $100k a year. (Buzzfeed)
A former Morgan Stanley trader has founded an online savings company called Plum. (FT Advisor)
Another former Morgan Stanley trader has moved to the buy-side as a portfolio manager at Insight Investments. (Investment Week)
This time last year, Jamie Dimon bought some shares in J.P. Morgan. They're now worth $17m more than he bought them for. (Dealbreaker)
You're three times more likely to get a job if you're called Adam than if you're called Muhammad. (BBC)
Photo credit:The trading floor by Salim Fadhley s licensed under CC BY 2.0.