Automation at Goldman, The Computer takes out four people

Today, nearly 45 percent of trading is done electronically, according to Coalition, a U.K. firm that tracks the industry.

Pay:

Average compensation for staff in sales, trading, and research at the 12 largest global investment banks, of which Goldman is one, is $500,000 in salary and bonus, according to Coalition. Seventy-five percent of Wall Street compensation goes to these highly paid “front end” employees, says Amrit Shahani, head of research at Coalition… Investment bankers working on corporate mergers and acquisitions at large banks like Goldman make on average $700,000 a year, according to Coalition, and in a good year they can earn far more.

Automating those $700,000+ meat-sacks:

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.

Finding the things to automate:

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 are “begging to be automated,” he said.

To be all double-turns-out about the grim automation stuff, in theory, this could mean hiring more programmers and people who support those robots, bringing down those big chunks of cash from “rainmakers” and spreading it down to “lower” grade staff. Of, you know, the bank can just keep that money and trickle it up to execs and share-holders.

Source: As Goldman Embraces Automation, Even the Masters of the Universe Are Threatened

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To illustrate this point during the opening keynote, George Kledaras, CEO of FIX Flyer, which creates algorithmic trading platforms, talked about how impossible it is for people to keep up and used the day when the statements from the Federal Open Markets Committee of the US Federal Reserve Bank are put out. The entire cycle, from the nanosecond that the FMOC statement was released, including the transmission of trading instructions from Chicago, where the report came out, to the exchanges in New York, took 150 milliseconds. After that, most of the trading was done.

Well, index funds it is for us normals I guess.

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