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Okay, You Can Start Worrying About Robots Now

JPMorgan's equities robo-trader is coming for you.
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By D J Shin (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

By D J Shin [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

Headlines proclaiming the imminent demise of skilled occupations at the hands of artificially intelligentrobots have become so commonplace that (uh-oh!) a robot could probably write them by now, hardy har har.

Joke's over. A robot is coming for you, too, Wall Street. And for real this time:

JPMorgan will soon be using a first-of-its-kind robot to execute trades across its global equities algorithms business, after a European trial of the bank’s new artificial intelligence (AI) programme showed it was much more efficient than traditional methods of buying and selling.
The AI — known internally as LOXM — has been used in the bank’s European equities algorithms business since the first quarter and will be launched across Asia and the US in the fourth quarter, Daniel Ciment, JPMorgan’s head of global equities electronic trading, told the Financial Times.

Not only has JPMorgan developed a computer program to do that most Wall Street of Wall Street jobs – trading big stocks for big clients – it's already been in use since spring. The most pressing career question for traders has gone from am I replaceable? to am I a replicantin a scant few months.

Of course, banks have already rolled out plenty of robots that do human tasks. But most of these have tackled sleepy back-office chores or complementary add-ons that probably don't equate to actual job losses. Take another recent robot-scare headline from FT, in which we learn that UBS has...

a relatively simple, automated programme for dealing with clients’ post-trade allocation requests. The system, which UBS developed with Deloitte, scans for emails sent by clients detailing how they want to divide large block trades up between funds. It then processes these and executes the transfers.

And a system that...

uses machine learning to develop new strategies for trading volatility on behalf of clients. It examines vast amounts of trading data and builds a strategy based on learning from market patterns.

These applications are neat and all, but they don't spell doom for an entire class of financial industry employees. JPMorgan's new equities trading gizmo, however, exists to do just that:

“Such customisation was previously implemented by humans, but now the AI machine is able to do it on a much larger and more efficient scale,” said David Fellah, of JPMorgan’s European Equity Quant Research team. Mr Ciment said that, so far, the European trials showed that the pricing achieved by LOXM was “significantly better” than its benchmark.

Executing block trades for institutional clients is, needless to say, just one little planet in the larger universe of securities dealing. Humans will still be needed to find new clients, manage relationships with them, and opportunistically spread word of their distress when they face liquidation. There will always be a place for heart, soul and guts on the trading floor, even when most of the actual trading is done by .exe files. It's just that that place is getting smaller.

JPMorgan develops robot to execute high-speed trades [FT]


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