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Goldman Sachs automated trading replaces 600 traders with 200 engineers

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Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#11

Post by burkaman »

tomelders wrote: post #4

A agency that I once worked for was asked to create a presentation of the future of trading for a well known trading platform. It was the typical fluff around voice interfaces, augmented reality, VR and all that drivel. But we all knew what the future really meant - taking people out of the equation - but we also knew that the people paying for the presentation didn't want to hear that. When people talk about the ris…

Isn't this type of trading sort of unique in how easy it is to consume the data? Even in other investing areas, people who just "look at data and make decisions" cannot be easily replaced until computers can read and understand natural language and understand the state of the world. I can't immediately think of anything else this type of automation could apply to.

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#12

Post by Retric »

burkaman wrote: post #11
tomelders wrote: post #4

A agency that I once worked for was asked to create a presentation of the future of trading for a well known trading platform. It was the typical fluff around voice interfaces, augmented reality, VR and all that drivel. But we all knew what the future really meant - taking people out of the equation - but we also knew that the people paying for the presentation didn't want to hear that. When people talk about the ris…

Isn't this type of trading sort of unique in how easy it is to consume the data? Even in other investing areas, people who just "look at data and make decisions" cannot be easily replaced until computers can read and understand natural language and understand the state of the world. I can't immediately think of anything else this type of automation could apply to.

Computers are already making trades based on natural language articles.

EX of some research from 2008: http://www.seas.upenn.edu/~cse400/CSE400_2007_2008/DavdaMitt...

You see real world movement within seconds of the release of some public data. Which is far to soon for humans to read much of anything.

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#13

Post by totalZero »

burkaman wrote: post #11
tomelders wrote: post #4

A agency that I once worked for was asked to create a presentation of the future of trading for a well known trading platform. It was the typical fluff around voice interfaces, augmented reality, VR and all that drivel. But we all knew what the future really meant - taking people out of the equation - but we also knew that the people paying for the presentation didn't want to hear that. When people talk about the ris…

Isn't this type of trading sort of unique in how easy it is to consume the data? Even in other investing areas, people who just "look at data and make decisions" cannot be easily replaced until computers can read and understand natural language and understand the state of the world. I can't immediately think of anything else this type of automation could apply to.

Yes. Not to mention that spreads are so tight that the only real challenge for a cash trading desk is how to read the flow, and manage inventory, into events. Computers don't do a great job of interpreting doublespeak and insinuation, which is a substantial part of earnings calls and other releases of information.

Derivatives trading has grown as cash trading has shrunk. And the banks haven't figured out how to automate that business yet.

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#14

Post by fullshark »

Namrog84 wrote: post #6

Since when are traders "the Masters of the Universe"? Apparently a 1987 reference to a Tom Wolfe novel? Is this phrase commonly used in finance? or just a sensationalized title from the author. I feel like if any profession is going to be given that title, it should be engineers and scientists. Though I am definitely biased.

It's a Bonfire of the Vanities reference which was a He-man reference for sure. It's tongue in cheek.

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#15

Post by tomelders »

burkaman wrote: post #11
tomelders wrote: post #4

A agency that I once worked for was asked to create a presentation of the future of trading for a well known trading platform. It was the typical fluff around voice interfaces, augmented reality, VR and all that drivel. But we all knew what the future really meant - taking people out of the equation - but we also knew that the people paying for the presentation didn't want to hear that. When people talk about the ris…

Isn't this type of trading sort of unique in how easy it is to consume the data? Even in other investing areas, people who just "look at data and make decisions" cannot be easily replaced until computers can read and understand natural language and understand the state of the world. I can't immediately think of anything else this type of automation could apply to.

Not really. The world is data. Anything you need to know about the world is in a table somewhere, and the web has done a great job of making the planets data accessible to machines.

Other areas may be more complex, but complexity isn't as big a barrier as it may seem.

Also, those areas are probably not as complex as people think they are. I'm reminded of the AI that started making breakthroughs in oncology by looking at the cells around a tumour, despite the scientific consensus that there was nothing to be learned from the cells around a tumor.

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#16

Post by B1FF_PSUVM »

maxxxxx wrote: post #8
chollida1 wrote: post #3

....where the time frame involved is 17 years from 2000 until now. It's also weird that they don't mention the about to be dismantled Dodd-Frank Act (Volker Rule) that forced most sell side firms out of prop trading. I guess the headline, "computers replace humans for the most mundane and rules based tasks" doesn't grab headlines as much:) One other interesting tidbit > Some 9,000 people, about one-third of Goldman’s…

"And not to put too fine of a point on it, but replacing a trader making $1,000,000 a year because he has a direct PnL with a 1/3 of an engineer making 1/2 of that, because the algo has the Pnl not the trader, is a big win for the bonus pool available to management:)" Even better if you can outsource that engineer to India after a while :-)

Bonusgasm ...

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#17

Post by _wp3r »

brilliantcode wrote: post #9

I'm super skeptical of these type of automated trading outfits. There's no edge in them. All you've done is take a shoddy system done by hand into code. At the end of the day, they still crap out when the market conditions it was designed for shifts or naive view of the markets as something as a math formula. Exceptions are HFT, arbitrages where you don't need to speculate and take the corresponding risks.

I believe the article is mostly referring to trading and not investing. Trading as in the operational functions of trades(organizing direct registered or street name broker buyers and sellers), not the investment strategy associated with holdings.

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#18

Post by tomjen3 »

tomelders wrote: post #4

A agency that I once worked for was asked to create a presentation of the future of trading for a well known trading platform. It was the typical fluff around voice interfaces, augmented reality, VR and all that drivel. But we all knew what the future really meant - taking people out of the equation - but we also knew that the people paying for the presentation didn't want to hear that. When people talk about the ris…

No doubt. The last people to be replaced are going to be software devs (because when you can write a computer program with an AI you can make the AI write the AI and you have general AI), cleaning ladies and probably police investigators.

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#19

Post by nosuchthing »

Retric wrote: post #12
burkaman wrote: post #11

Earlier quoted context omitted.

Isn't this type of trading sort of unique in how easy it is to consume the data? Even in other investing areas, people who just "look at data and make decisions" cannot be easily replaced until computers can read and understand natural language and understand the state of the world. I can't immediately think of anything else this type of automation could apply to.

Computers are already making trades based on natural language articles. EX of some research from 2008: http://www.seas.upenn.edu/~cse400/CSE400_2007_2008/DavdaMitt... You see real world movement within seconds of the release of some public data. Which is far to soon for humans to read much of anything.

I'd have to wonder what type of safeguards vet against intentional false data released to poison the well of other HFT bots?

Maybe it's not too important yet because HFT bots only need to game the slower mass of "dumb (reactionary) money"

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#20

Post by blazespin »

fun fact: Advanced AI techniques work in very high dimensional spaces in such a way that it's impossible to clearly understand why a program reaches a conclusion that it does. Market trading is about allocating capital that decides how labor itself is allocated. So, increasingly, we have computers that are telling people what to work on and we don't know why they are making those decisions. We could remove the computers, but then our economy would likely fall into a deflationary spiral / depression due to lack of growth.
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