AI to replace traders, quants and sales

What do you mean lack of huge data sets?

I can't say I know much about their fate, but I thought it'd be helpful to mention Monday's WSJ article on all the Ibanks, esp. GS, rushing to buy up more space for trading floors. I'd say that's a good sign...

A lot of the stuff banks trade remains very illiquid. A lot of products are bespoke or rather exotic. Meaning not very many people trade this stuff. Customers want markets made. They want to sell now, not a few days later when someone takes the other side of the trade. Banks provide liquidity and thus provide a very valuable service in the way an electronic exchange cannot. Quite honestly, most of the very liquid markets provide very low margins anyway and banks keep these desks around to provide a service to the client. If they break even some banks are happy.

I don't think there'll ever be a shortage of job security in sales because of computers. You'll always have clients who feel more comfortable calling another human being to place a trade for them.

That said, a computer executes trades in milliseconds, works 24/7, can process market info faster than a human these days, is willing to work for 500 kwh a month, and takes up 1/10 the trading floor real-estate a human takes. IMHO, it may be arrogant to suggest that computers will never replace traders.

Already, the computers at a lot of the fixed income desks are doing the vast majority of the work in pricing securities. Can we really say that computers won't be able to replace at least 50% of the market maker jobs and the vast majority of the floor broker jobs in the next decade?

If you're thinking long-term, best bet is definitely banking and not trading. Banking (or PE for that matter) is an inherently relationship-based business (at least at the mid to upper levels), and thus it is clear that computers will never encroach upon bankers' territory. That being said, the more illiquid and esoteric products aren't in great danger of being replaced anytime soon. But then again, does anyone really find pricing and structuring a collateralized debt obligation all that exciting or interesting? I certainly don't, and I'm fairly certain that anyone outside of finance that you meet will be bored to death talking with you. Not that banking conversation is the most interesting in the world, but at least non-finance people can relate to the buying and selling of a car company, for example. Just my two cents....

Which desks do you believe have the best longevity (least likely to be replaced by automation) I really am attracted to HY but i know they are tough desks to get on

Why do people feel HY is so difficult to get as a placement? I think anything highly structured or illiquid (It probably is illiquid if it is highly structured.) will never be replaced by automation.

One could argue that HY may have a higher chance of getting replaced than most. It's certainly not a structured field, and is really pretty basic. Career longevity will be on the desks that focus entirely on derivatives, with a good portion of either really illiquid deals and/or structured trades--commodities, emerging markets (structured side, because typical emerging markets is nothing more than cash bonds and CDS, refer back to my HY comments), structured FX, rate derivatives, and structured credit.

Thanks for the feedback. Im going to be an SA at a BB. Do you think ill have much exposure to derivatives or they will keep it basic? I know i cant do much b/c of a lack of licensing and experience but I really want to enter this field and not get screwed 5 years down the road. Im considering sales as well if itll keep me employed. I know i cant suck cause then no matter what desk im on ill be out of a job haha.

What you will be exposed to depends on what desks you're rotating on. During my MBA summer internship I specifically requested all derivatives desk, so I got plenty of exposure to derivatives. Now you may not have a clue what you're doing half the time when you first start, but you'll eventually pick it all up. And licensing, Series 7, etc. really has nothing to do with anything during your summer. The limit to what you do is the structure of the program (the more desks you rotate through the more exposure you get, but also the less "real" work you do; versus only doing 2-3 desks over the summer, where you do more valuable work, but will gain less exposure to different areas of the bank).

I don't know if traders (in traditional liquid markets) would get completely wiped out - their jobs would probably just be expanded to be more quantitative in nature;

Hey Brady,

If trading is automated, what kind of work do you do - programming? Do you trade your own PA at all?

most otc securities still require manual trading and a lot of trades r done by phone calls