Another Record High For The Nasdaq Composite

Bank of America is opening robo branches. The bank (BAC) has opened three automated branches over the past month and has plans to roll out more over the next year. Customers can use ATMs and have video conferences with employees at other offices. BofA is set to open 50 to 60 new branches over the next year, but will also be closing some in certain markets, so they will not represent a net increase.

At its height, back in 2000, the US cash equities trading desk at Goldman Sachs’ New York headquarters employed 600 traders, buying and selling stock on the orders of the investment bank’s large clients. Today there are just two equity traders left. Automated trading programs have taken over the rest of the work, supported by 200 computer engineers.

The experience of its New York traders is just one early example of a transformation of Goldman Sachs (GS), and increasingly other Wall Street firms, that began with the rise in computerized trading, but has accelerated over the past five years, moving into more fields of finance that humans once dominated.  Some areas of trading, like currencies and even parts of business lines like investment banking are moving in the same automated direction that equities have already traveled.

Today, nearly 45 percent of trading is done electronically, per Coalition, a UK firm that tracks the industry. Complex trading algorithms, some with machine-learning capabilities, first replaced trades where the price of what’s being sold was easy to determine on the market, including the stocks traded by Goldman’s old 600.

Now areas of trading like currencies and futures, which are not traded on a stock exchange like the New York Stock Exchange, are coming in for more automation as well. To execute these trades, algorithms are being designed to emulate as closely as possible what a human trader would do.

Goldman Sachs has already begun to automate currency trading, and has found consistently that four traders can be replaced by one computer engineer. Some 9,000 people, about one-third of Goldman’s staff, are computer engineers.

Goldman’s new consumer lending platform, Marcus, aimed at consolidation of credit card balances, is entirely run by software, with no human intervention. Next, will be the automation of investment banking tasks, work that traditionally has been focused on human skills like salesmanship and building relationships.

Though those “rainmakers” won’t be replaced entirely, Goldman has already mapped 146 distinct steps taken in any initial public offering of stock, and many can – and will – be automated. Reducing the number of investment bankers would be a great cost savings for the firm. Investment bankers working on corporate mergers and acquisitions at large banks like Goldman make on average $700,000 a year, per Coalition, and in a good year they can earn far more.

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Chee Hin Teh 3 years ago Member's comment

Thanks for sharing

Chee Hin Teh 3 years ago Member's comment

Thanks for sharing