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Goldman fires 600 traders; replaces them with 2 traders/200 computer programmers
Posted on 2/13/17 at 2:20 pm
Posted on 2/13/17 at 2:20 pm
quote:
At its height back in 2000, the U.S. cash equities trading desk at Goldman Sachs’s 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. Marty Chavez, the company’s deputy chief financial officer and former chief information officer, explained all this to attendees at a symposium on computing’s impact on economic activity held by Harvard’s Institute for Applied Computational Science last month.
The experience of its New York traders is just one early example of a transformation of Goldman Sachs, 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. Chavez, who will become chief financial officer in April, says 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.
quote:
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 but rather have prices that fluctuate, 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, explains Coalition’s Shahani.
Goldman Sachs has already begun to automate currency trading, and has found consistently that four traders can be replaced by one computer engineer, Chavez said at the Harvard conference. Some 9,000 people, about one-third of Goldman’s staff, are computer engineers.
LINK
5
Posted on 2/13/17 at 2:24 pm to euphemus
quote:
with 2 traders
talk about bragging rights.
Posted on 2/13/17 at 2:26 pm to Chad504boy
no kidding... impressive.. now I see that I would have been a computer engineer instead of a petroleum engineer...
Posted on 2/13/17 at 2:52 pm to euphemus
Got a feeling this is going to backfire on GS, looking forward to it.
Posted on 2/13/17 at 5:29 pm to RollTide4Ever
Didn't read the whole article, but did they also mention that all the i banks had to gut their prop trading desks due to regulation? I feel like that might have some impact on those numbers.
Posted on 2/13/17 at 7:26 pm to euphemus
Artificial Intelligence is getting bigger and bigger.
Its making many 'white-collar' type jobs obsolete.
Its making many 'white-collar' type jobs obsolete.
Posted on 2/13/17 at 8:46 pm to euphemus
Not shocking. Renaissance Technologies has been crushing the hedge fund game for a while. Heck, the Medallion fund's worst year over the last two decades was something like a 20% gain. Baws at Goldman can't match that.
Posted on 2/14/17 at 7:20 am to Reubaltaich
quote:
Its making many 'white-collar' type jobs obsolete.
I'm glad I'm almost at retirement because in the future, many white collar jobs won't exist.
Posted on 2/14/17 at 7:30 am to chongo
Goldman Sachs isn't a hedge fund, so of course they won't match a hedge fund's performance. It's comparing apples and oranges.
Posted on 2/14/17 at 7:44 am to reb13
Yeah, but things aren't great at the hedge funds either.
This article ( LINK) just came out from EFinancialCareers this morning:
It used to be, pre-Volcker, that a lot of the great prop traders used to get their start at places like GS or MS, and stay for several years, before branching out and forming their own hedge funds like AQR or PDT Partners.
But now investment banks are getting hollowed out everywhere you look. Even at places like GS, compliance roles are up in recent years, but everywhere else morale is low. There are aging workforces with big backlogs for promotions, lower overall standards, and all the biggest new stars want to leave immediately in their 2nd or 3rd year to go straight into private equity (which has its own problems).
In the hedge fund world, everything is so crowded right now it's ridiculous. I imagine that a big shakeout has got to be coming soon once the overall market breaks for the worse. Institutional investors and endowment managers everywhere are souring on hedge funds.
The only thing that seems to be hot right now is algo trading, and so you see that the creme de la creme in quant hedge funds (Two Sigma, Renaissance, Tower, Point72, etc.) are mostly hiring STEM grads in their early 20s with advanced programming skills out of the following schools: Harvard, MIT, Princeton, CalTech, Stanford, & Carnegie Mellon. Good luck getting hired at the blue chip quant HFs coming from anywhere else.
For the best job listings, you constantly see things like "expert in Python", "familiar with KDB and Linux environment", "low latency", "multithreading", "full stack Java developer", etc.
(EDIT: How could I forget the AI / machine learning / deep learning / predictive intelligence buzzword craze!)
Then there's Dodd-Frank. Everybody's still throwing money at regulatory compliance for Dodd-Frank, but it probably won't last much longer.
Welcome to the hollowed-out landscape of investment banking and hedge funds after the worst 16 years of economic performance in U.S. history.
This article ( LINK) just came out from EFinancialCareers this morning:
quote:
In a brutal new world for hedge funds, only the largest firms or those with a small, nimble start-up mentality will survive. Hedge funds need to change, and central to this is attracting technology professionals who would rather be somewhere else.
This is according to a new report from Boston Consulting Group, which predicts that hedge fund assets could continue to slide by up to 30% by 2020 and margins could fall by 20% thanks to smaller fees and more capital expenditure.
Hedge funds need to embrace technology to survive, to develop new IT that can “provide access to new sources of data and the most advanced analytical and decision-making techniques.” But tech talent is looking towards technology companies, fintech start-ups and other digital firms. “Ambitious and inspired graduates have shifted their gaze from Wall Street to Silicon Valley,” says the report.
Hedge funds are very poor at attracting and retaining technology talent, it says. They need a “new breed of manager, a tech-style working environment and even tech-heavy location such as the West Coast”.
It used to be, pre-Volcker, that a lot of the great prop traders used to get their start at places like GS or MS, and stay for several years, before branching out and forming their own hedge funds like AQR or PDT Partners.
But now investment banks are getting hollowed out everywhere you look. Even at places like GS, compliance roles are up in recent years, but everywhere else morale is low. There are aging workforces with big backlogs for promotions, lower overall standards, and all the biggest new stars want to leave immediately in their 2nd or 3rd year to go straight into private equity (which has its own problems).
In the hedge fund world, everything is so crowded right now it's ridiculous. I imagine that a big shakeout has got to be coming soon once the overall market breaks for the worse. Institutional investors and endowment managers everywhere are souring on hedge funds.
The only thing that seems to be hot right now is algo trading, and so you see that the creme de la creme in quant hedge funds (Two Sigma, Renaissance, Tower, Point72, etc.) are mostly hiring STEM grads in their early 20s with advanced programming skills out of the following schools: Harvard, MIT, Princeton, CalTech, Stanford, & Carnegie Mellon. Good luck getting hired at the blue chip quant HFs coming from anywhere else.
For the best job listings, you constantly see things like "expert in Python", "familiar with KDB and Linux environment", "low latency", "multithreading", "full stack Java developer", etc.
(EDIT: How could I forget the AI / machine learning / deep learning / predictive intelligence buzzword craze!)
Then there's Dodd-Frank. Everybody's still throwing money at regulatory compliance for Dodd-Frank, but it probably won't last much longer.
Welcome to the hollowed-out landscape of investment banking and hedge funds after the worst 16 years of economic performance in U.S. history.
This post was edited on 2/14/17 at 7:54 am
Posted on 2/14/17 at 8:31 am to Doc Fenton
I guess we can always be ditch diggers? That still has a way to go before its all robots?
Posted on 2/14/17 at 8:40 am to b-rab2
We could always shift direction and find careers in Hollywood. Oh wait.... " Why Hollywood As We Know It Is Already Over"
Posted on 2/14/17 at 10:11 am to Doc Fenton
Great post.
Honest question, are these bad things? I know it is bad if that's your profession but I am wondering if the "hollowing of IB and HF" is bad at a macro scale?
M&A has historically missed on value creation and capital is being invested via low fee ETFs or private investment opportunities. This seems like more of a natural evolution away from a bloated Wall St.
Honest question, are these bad things? I know it is bad if that's your profession but I am wondering if the "hollowing of IB and HF" is bad at a macro scale?
M&A has historically missed on value creation and capital is being invested via low fee ETFs or private investment opportunities. This seems like more of a natural evolution away from a bloated Wall St.
This post was edited on 2/14/17 at 10:12 am
Posted on 2/14/17 at 10:38 am to lynxcat
Good point. I'm a firm believer in creative destruction and the macro benefits that accrue from the scientific downscaling and rationalization of mature industries.
So most of this stuff is good, so much as it pertains to increasing automation and things like that. However, there are also some bad signs from the lack of underlying economic business, or simply having too much money chasing too few capital investment business opportunities. Additionally, a souring on active management might lead to an over-reliance on ETFs, and there is an argument to be made that near-ZIRP monetary policy is killing opportunities for skillful stock selection, and causing a herd mentality that doesn't intelligently distinguish risks across asset classes.
But I'm nitpicking. Overall it's a net positive for society if IB & HF are getting downsized.
So most of this stuff is good, so much as it pertains to increasing automation and things like that. However, there are also some bad signs from the lack of underlying economic business, or simply having too much money chasing too few capital investment business opportunities. Additionally, a souring on active management might lead to an over-reliance on ETFs, and there is an argument to be made that near-ZIRP monetary policy is killing opportunities for skillful stock selection, and causing a herd mentality that doesn't intelligently distinguish risks across asset classes.
But I'm nitpicking. Overall it's a net positive for society if IB & HF are getting downsized.
Posted on 2/14/17 at 11:47 am to kywildcatfanone
quote:
I'm glad I'm almost at retirement because in the future, many white collar jobs won't exist.
Or you can look at it as, you would be happy that you were just starting, because if robots take over all the jobs, a whole new paradigm will be created that potentially allows everyone unlimited free time.
Posted on 2/14/17 at 11:51 am to Doc Fenton
quote:
Point72
I think I have a friend of a friend that works there. Exception to the rule on those schools though. Talking about trading with our uber driver wanted us all to blow our brains out.
This post was edited on 2/14/17 at 11:51 am
Posted on 2/14/17 at 11:52 am to Teddy Ruxpin
Posted on 2/14/17 at 12:24 pm to b-rab2
quote:
I guess we can always be ditch diggers? That still has a way to go before its all robots?
I think that iRobot has that covered too.
Posted on 2/14/17 at 12:55 pm to Doc Fenton
quote:
Overall it's a net positive for society if IB & HF are getting downsized
I'm thinking further out. Outside of IB and HF.. Look at the auto industry, most of that is going to - already there - robots.. not much need for working bodies.
Im sort of going off of topic here but I was at an SPE meeting in december and it was on drilling automation vs people rigs and how they differ with speed for drilling..
Interesting results is that the machines were consistently fast as expected but a veteran drilling crew was mostly faster as time went on.
Posted on 2/14/17 at 12:58 pm to Teddy Ruxpin
quote:
because if robots take over all the jobs, a whole new paradigm will be created that potentially allows everyone unlimited free time.
then just the government gives us a paycheck?
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