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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

#51

Post by popobobo »

appleiigs wrote: post #37
cm2187 wrote: post #10

A lot of dope smoking in this article. There are a handful of markets that are large and liquid enough to fully move to electronic trading, like spot FX, vanilla interest rate swaps, perhaps treasuries trading. But most other markets are very much relationship driven. For instance a trader will make a market on illiquid bonds based on what he thinks is the appetite from the short list of potential buyers, and that's…

Your comment is spot on. The work Goldman Sachs does is relationship driven. As a corporate client of GS, I don't need data. I need advice. Don't confuse the work that investment banks do with the work that NASDAQ does or with high-frequency trading. In addition, the reason why GS has less traders and more developers is more to do with government regulations preventing GS from doing certain types of trading. Not beca…

man i can smell the 200 west from you 1000 feet away. F9 all the way to the ferry.

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

#52

Post by grondilu »

What about other instruments? I used to work as an IT in a small investment bank, and the traders there were not doing any equity trading. They were dealing with bonds, swaps and stuff, and they were mostly doing arbitrage, IIRC. Also there was one guy on forex, but I vaguely remember that he was not supposed to speculate, rather he was supposed to trade whatever was necessary for the other guys to work.

Is the equity market really that significant that we seem to only talk about it?

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

#53

Post by karim »

cm2187 wrote: post #45
zardo wrote: post #32

Earlier quoted context omitted.

>Absolutely, but isn't this type of software generally used to augment existing jobs, rather than replace them? Is there a difference? If a person does 10x as much you need 1/10th as many of them.

These algorithms are only good at front running the reaction of the market, which is fairly predictable in the short term when a relevant piece of news is published. They are nowhere for making long term investment decisions. AI everywhere is as naive as software everywhere. It costs a lot of money to develop and maintain software professionally. It's uneconomical to staff an IT team to replace every routine job ther…

> It will be the same with AI. If you apply enough bright people's mind for long enough, we can possibly automate certain niche jobs, but that's going to be completely uneconomical.

The thing is, it doesn't have to be an all-or-nothing proposition. If you can write software to make a team of ten traders 10% more productive, it may be possible to do the same job with only 9 traders.

Over time, those productivity gains compound and you have literally cut in half the number of people on your trading floor.

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

#55

Post by eon1 »

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 don't need to understand natural language, they just need a little guidance towards what the data means. You can train a neural network, or you can just write some solution-specific code. A lot of people are not that hard to replace.

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

#56

Post by grondilu »

teachrdan wrote: post #42
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.

Another obvious example is actuaries and any number of other analysts in the insurance industry. According to Google[1], actuaries earn an average of just over $97k/year. While this may not strictly be an "investing area," it's a clear target for automation. 1. https://www.google.com/search?q=actuaries

I don't know about actuaries, but I do remember there was an article lately about an insurance company in Japan that replaced hundreds of workers with IBM's Watson.

https://www.theguardian.com/technology/2017/jan/05/japanese-...

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

#57

Post by eru »

teachrdan wrote: post #42
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.

Another obvious example is actuaries and any number of other analysts in the insurance industry. According to Google[1], actuaries earn an average of just over $97k/year. While this may not strictly be an "investing area," it's a clear target for automation. 1. https://www.google.com/search?q=actuaries

Actuaries have quite a high regulatory wall protecting them from other human competitors. But probably not from computers.

(I don't know about the legalities, but the laws requiring companies to have a actuary sign off on stuff probably can be satisfied by having on part time actuary shared between multiple companies sign off on computer generated analysis.)

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

#58

Post by eon1 »

rand_r wrote: post #26
tomelders wrote: post #15

Earlier quoted context omitted.

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…

The problem is understanding data. A human can learn a new word's meaning by reading its definition in a dictionary; a computer can't.

Even so, that doesn't stop one human helping the computer to understand, and thus replace x more humans.

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

#59

Post by extr »

teachrdan wrote: post #42
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.

Another obvious example is actuaries and any number of other analysts in the insurance industry. According to Google[1], actuaries earn an average of just over $97k/year. While this may not strictly be an "investing area," it's a clear target for automation. 1. https://www.google.com/search?q=actuaries

Part of the reason actuaries make so much is that they are certified and legally required to sign off on analysis, similar to the way civil engineers put their signature (and reputation) on their work. But you would be surprised how many decisions come down to "actuarial judgement", having good business sense, intimate knowledge of insurance rules and regulations...and not doing anything special with the data. Hell, some actuarial methods are the same as they were in the 70s. Data science is slowly eating their lunch in predictive modeling areas, but I wouldn't be surprised if they're still around after data science itself has been automated.

I work on a team of actuaries in a more data science-y role. Believe me, I had the same impression initially: "Can't we automate some of this stuff?". But I've since come to see their value.

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

#60

Post by rl3 »

appleiigs wrote: post #37
cm2187 wrote: post #10

A lot of dope smoking in this article. There are a handful of markets that are large and liquid enough to fully move to electronic trading, like spot FX, vanilla interest rate swaps, perhaps treasuries trading. But most other markets are very much relationship driven. For instance a trader will make a market on illiquid bonds based on what he thinks is the appetite from the short list of potential buyers, and that's…

Your comment is spot on. The work Goldman Sachs does is relationship driven. As a corporate client of GS, I don't need data. I need advice. Don't confuse the work that investment banks do with the work that NASDAQ does or with high-frequency trading. In addition, the reason why GS has less traders and more developers is more to do with government regulations preventing GS from doing certain types of trading. Not beca…

>As a corporate client of GS, I don't need data. I need advice.

Such as: "Buy these sub-prime assets that we've bundled into CDOs. By the way, we're actively betting against you and stand to make a ton of money when they tank."

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