By Tim Ferguson, 3 October 2006 13:05
NEWS
The robots are on the march and there could be little that City traders can do about it.
Research from IBM has predicted that by 2015 there will be 90 per cent fewer traders employed by the top investment banks as they lose their jobs to computer systems.
In what IBM has dubbed the "algorithmic arms race," investment banks are trying to implement the fastest and most sophisticated systems in a bid to secure an advantage.
The systems which are being increasingly used in investment banks and stock exchanges work to a set of rules or algorithms that allow them to respond to changes in market conditions and make the most profitable trades.
Already the London Stock Exchange is increasing the capacity of its systems to cope with a big increase in algorithmic trading.
Speed is one of the biggest advantages that these computerised systems have over human traders - as well as the ability to operate around the clock, without wages.
But the threat of being replaced may be smaller for higher level traders who take strategic risk positions that computer systems are less able to determine.
And Chris Skinner associate director of analysts Tower Group said trader-less exchanges won't be appearing any time soon.
He told silicon.com: "Twenty years ago, people were predicting paperless offices and cashless societies. They haven't happened and neither will trader-less stock exchanges."
The predictions made by IBM, are "possible but not probable", he said.
Skinner added: "Most business is between people, not machines. There may be a 20 per cent fall in the number of traders in five years and possibly 30 per cent in 10 years' time."
But Skinner acknowledges traders will need to become more sophisticated if they are to survive - and he said there will be a "stripping out of the gene pool" as those unable to cope with new demands fall by the wayside.
Comments
There is 1 comment. Join the discussion
1. Chris Stevens
Are these the same program/algorithmic trading systems that have to be switched off to prevent the collapse of the financial system whenever a major incident like 7/7 takes place?
These systems depend on the stealth placement of orders in small(?) amounts to take advantage of transitory pricing anomalies in the financial markets. Other defensive algorithmic systems will evolve that detect such trading patterns and the market will tend to stasis.
In any event people realise that much of this trading has no real economic purpose. It is gambling rather than investment and only the bookie (Bank)wins. Unfortunately the chips on the table are everybody's pension savings. Eventually Governments will have the courage to bring this crazy gambling under control.