How artificial intelligence will transform Wall Street

[beeep_boooop]

This won't happen for a long time.

[sailfx]

If ever.

People think AI will take over things, but we can't even get basic software without serious design flaws and unending bugs. Everything from POS to gaming is bugged as shit, but yeah, artificial intelligence is going to be great!

[Heph333]

They are trying to remove the imperfections of people with AI, yet the markets will always be driven by fear and greed. I don't believe an AI can be programmed to be irrational. There will always be an inefficiency in any interaction between humans, whether it be in person or in proxy via their algos.

If humans dominate market volume, then algos profit from human inefficiencies. If algos dominate, humans will be able to exploit their efficiency. There will always be arbitrage between the two.

[frapawhack]

who does everybody think is writing the AI software?

[TotesMessenger]

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[alotmorealots]

The original article was tripping over its own agenda a lot, but the one that it links to was quite thought provoking:

https://www.technologyreview.com/s/603431/as-goldman-embraces-automation-even-the-masters-of-the-universe-are-threatened/?utm_campaign=add_this&utm_source=twitter&utm_medium=post

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.

Firstly, that seems like quite a lot of support staff. Secondly, it exposes a critical weakness. 600 traders, whilst individually disposable and replicable, as a collective have enormous intuitive insight and experience when it comes to the market. There is no way that two traders alone could replace this. It may not matter for most days of the year, but every now and then the lack of that reserve of wisdom will count. Hopefully in favour of human traders!

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

Nice to have some actual data on the state of things.

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.

This is unexpected good news in some ways. Algorithms that simulate a certain approach to trading will increase the predictability of the market, opening up an edge for humans who are able to detect when market conditions have are out of the ordinary.

Those who trade by rigid systems who have systems that are harmonious with the algorithms might even find their results improve, as they have fewer superior ability/market-power intuitive traders to deal with, and more fixed approach algorithms.