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Monday, July 31, 2017

JPM Develops A.I. Robot To Execute High Speed Trades, Put Humans Out Of Work

With high-margin FICC revenues stuck in a secular decline across the financial industry, banks are forced to extract as much profit as possible from existing product lines. Which explains why JPMorgan will soon be using a "first-of-its-kind robot" to do away with carbon-based traders altogether and execute trades across its global equities algorithms business using a "robot", after a recent trial of JPM's new artificial intelligence (AI) program showed it was "much more efficient than traditional methods of buying and selling", the FT reports.
JPMorgan, the world’s biggest bank by revenue, believes it is the first on Wall Street to use AI with trade execution and said it would take rivals 18 to 24 months and an investment of “multiple millions” to come up with similar technology.
The AI — known internally as LOXM — has been used in the bank’s European equities algorithms business since the first quarter and will be launched across Asia and the US in the fourth quarter, Daniel Ciment, JPMorgan’s head of global equities electronic trading, told the Financial Times.
In the latest victory for robot kind over humans, LOXM’s job will be to execute client orders with maximum speed at the best price, "using lessons it has learnt from billions of past trades — both real and simulated — to tackle problems such as how best to offload big equity stakes without moving market prices."
In other words, one giant "big data" aggregator, using historical precedent to guide future decisions, which coming in a time when "this time it's certainly different" for the broader stock market, could be a big mistake.
“Such customization was previously implemented by humans, but now the AI machine is able to do it on a much larger and more efficient scale,” said David Fellah, of JPMorgan’s European Equity Quant Research team. Mr. Ciment said that, so far, the European trials showed that the pricing achieved by LOXM was “significantly better” than its benchmark.

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