02.28.2018

AI Moves Into Trading

Artificial intelligence is making vast strides in healthcare, retail sales, and other verticals, but it has had the same level of penetration into institutional finance, according to Richard Johnson, vice president of market structure and technology during a recent webinar.

Whether it is analyzing trade data for potential spoofing attempts or generating research reports on listed companies, the technology can analyze large volumes of structured and unstructured data quicker than people, which can boost their productivity, wrote Ivy Schmerken, editorial director at Flextrade.

When polled, the webinar’s audience responded that AI would have the most significant impact on research (37.5%), trading (34.7%), compliance (23.6%), and sales (4.2%).

Global banking giant J.P. Morgan & Chase reportedly began incorporating AI into its liquidity seeking algorithms globally throughout 2017, which have performed better than their previous incarnations.

Greenwich’s Johnson expects that the next-generation of algorithms will be AI-based since an estimated 80% of institutional buy-side order flow electronically,

“They’re going to be better able to make their own decisions based on learning from data they have in the [internal] trading logs of millions of historical orders and figuring out the best way to execute new orders entered into the system,” he said during the webinar.

Will AI cost traders their jobs? Johnson noted that banks have been trimming their headcounts for more than a decade and he expects the trend to continue.

It is too early to tell if AI will become a job-killer for traders, but there is a possibility that people will move into different roles, he added.

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