Morning Coffee: The most frightening thing to hit trading jobs in years. The Mooch's main mistake
There are a lot fewer less working in equities trading than there were. Last year the Economist famously claimed that Goldman Sachs had 600 people trading equities in 2000 and just two, plus 200 software engineers supporting them, in 2016. Goldman insiders say this is a bit of an exaggeration, but still - you get the gist. Traditional voice only equities traders have been decimated by electronic trading technologies. Now, J.P. Morgan has devised something which could do away with any remaining human beings, plus - ultimately - many of those programmers too.
It's called LOXM. It's been trialed by J.P. Morgan's European business since the first quarter and the Financial Times says it's due to be rolled out across Asia and the U.S. between October and December this year. LOXM appears to be the brainchild of David Fellah, part of J.P. Morgan's European equity quant research team, and a longstanding enthusiast of machine learning.
Fellah's interest in machine should be indication enough of LOXM's nature. - LOXM is a self-teaching trading algorithm which is able to learn from past trades (both real and simulated) in order to to execute large and complex equities trades at the best price possible without moving markets. For a bank like J.P. Morgan it's a dream: "Such customisation was previously implemented by humans, but now the AI machine is able to do it on a much larger and more efficient scale," enthuses Fellah, adding that it will take rival banks 18 to 25 months and millions of dollars to come up with anything similar. For remaining equities traders, however, it's a nightmare: as machines have encroached upon trading, the complex trades executed by LOXM have been some of the only ones still requiring human intervention. What's left?
Separately, Wall Street's finest has fallen after 10 days and an expletive-laden telephone call to a journalist at the New Yorker. Anthony Scaramucci's errors during the time-twinkle in which he was White House Communications director were many, but the main one seems to have been to presume that he was his boss's special child and would be protected no matter what. The New York Times says Scaramucci boasted about reporting directly to Trump, which was fine until it became apparent that he did in some way report to new chief of staff John Kelly, who promptly fired him. Trump had reportedly gone off Scaramucci anyway, fearing that he was a "liability" and an "embarrassment" according to the New York Times. "The mooch" has been left with little to salve his wounded pride: he reportedly asked to keep his position at the U.S. Export-Import bank, but was stripped of that too. The only upside for Scaramucci is that he made around $80m when selling his fund of hedge fund business (to do the Trump job) and will be able to defer the capital gains tax on that because he was going to be a public servant.
Investment banks plan to charge asset managers up to $5,000 an hour for one-on-one meetings with star analysts. (Financial Times)
Goldman Sachs hired a very senior Deutsche Banker in China. (CNBC)
Reasons to work in Frankfurt: 'Businesses based in the country need a very specific reason to fire an employee or else they have to pay a large sum based on an individual’s tenure at the firm and the size of their family. Firms also must give exiting staff notice periods of up a year.' Although there are moves afoot to change this, changes could take years to implement. (Financial News)
Why jobs that leave London because of Brexit will never come back. - The planning cycle for related investments and infrastructure is spread over years. (Bloomberg)
HSBC says moving 1,000 staff to Paris because of Brexit will cost up to $300m. (Bloomberg)
The number of women earning more than £1m a year in the UK doubled in the five years to 2014-15, but they are still outnumbered by men by a ratio of 10 to one. (Financial Times)
Why environmentalists should work for J.P. Morgan: the bank wants to source 100% of its revenues from renewable sources and plans to mobilize $200bn of green investments between now and 2025. (BusinessGreen)
Here's how much you'll earn with an MBA, by industry. (Poets and Quants)