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JP Morgan To Use Algorithms To Predict Which Employees Will Go Rogue

Tyler Durden's picture




 

Earlier today we noted that Gregg Berman, the SEC’s HFT “investigator” whose algo investigating hilariously involved the use of a platform created by an HFT firm, will be leaving the regulator later this month. Perhaps he can give Jamie Dimon a ring because as it turns out, JP Morgan is in the process of creating a new division which, much like the SEC, will deploy machines in an effort that’s ostensibly designed to catch people doing things wrong, but which will, in the end, likely prove completely ineffectual at rooting out the type of manipulation and general chicanery that has over time transformed nearly every market into a farcical, manipulated shadow of its former self. 

The idea at JPM is to identify employees who are exhibiting the early signs of going rogue (we would suggest that placing giant notional bets in off-the-run CDS indices would be one such early warning signal) by using algorithms to “monitor dozens of inputs,” like measures of excessive risk-taking and substituting martini lunches for compliance meetings. Here’s more via Bloomberg:

Sally Dewar, head of regulatory affairs for Europe, who’s overseeing the effort. Dozens of inputs, including whether workers skip compliance classes, violate personal trading rules or breach market-risk limits, will be fed into the software.

 

“It’s very difficult for a business head to take what could be hundreds of data points and start to draw any themes about a particular desk or trader,” Dewar, 46, said last month in an interview. “The idea is to refine those data points to help predict patterns of behavior.”

 

JPMorgan’s surveillance program, which is being tested in the trading business and will spread throughout the global investment-banking and asset-management divisions by 2016, offers a glimpse into Wall Street’s future. An industry reeling from billions of dollars in fines for the actions of employees who rigged markets, cheated clients and aided criminals is turning to technology to police itself better. Failure to do so will provide ammunition for those pushing to separate trading operations from retail banks…

 

The program was hinted at in a report published in December on the bank’s website, “How We Do Business,” signed by CEO Jamie Dimon. It outlines ways the firm is improving compliance, including starting a global communications surveillance program.

 

“We recognized that enhancing market conduct would require using multiple preventive and detective levers in a coordinated way,” JPMorgan said in the report.

If this sounds creepily reminiscent of a sci-fi thriller, that’s because it kind of is:

Technology that predicts behavior, as in the 2002 science-fiction movie “Minority Report,” in which Tom Cruise plays a Precrime officer who hunts down murder suspects before they can act, raises ethical questions.

 

“What they’re trying to do is forecast human behavior,” said Mark Williams, a former Federal Reserve bank examiner who’s now a lecturer at Boston University’s Questrom School of Business. “Policing intentions can be a slippery slope. Do people get a scarlet letter for something they have yet to do?”

The answer, apparently, is “yes,” and if algos' periodic “mistakes” in the market are any indication of what could happen should a program, through some miscalculation or short circuit, go rogue in the process of identifying human rogues, we suspect there’s the potential for rather unfortunate outcomes. For instance, if one cannot trust the machines to differentiate between a Tesla April fools joke and the real announcement of a new line of cars, we wonder how they’ll be able to distinguish between humor, sarcasm, etc. On a more general level, appointing the same technology that facilitates flash crashes when it’s supposed to be providing liquidity to the position of head HR enforcer might end up creating unintended consequences and, paradoxically, could actually lead to more lawsuits on balance if the technology is better at screwing up than it is at doing its job because it seems to us that an employee who is let go, has their pay docked, or is otherwise aggrieved by a machine that erroneously brands him/her a threat, is very likely to sue. 

Of course when it comes to combating the types of behavior which lead governments to sue banks, there are options other than deploying Skynet — like fostering integrity and improving the corporate culture, both of which seem far more intuitive than subjecting the company’s entire base of human capital to surveillance by artificial intelligence:

New technology is half of a two-pronged effort to reduce legal bills. The other part involves a review of the firm’s culture.

Well, at least it was an afterthought.

In the end though, it’s not really clear what all the fuss is about because as Bloomberg reminds us, JPM really hasn’t been involved in too many questionable activities. About the only things that come to mind are “fraudulent mortgage-bond sales, the $6.2 billion London Whale trading loss, services provided to Ponzi-scheme operator Bernard Madoff and the rigging of currency and energy markets.”

Other than that, everything is on the up and up. 

 

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Wed, 04/08/2015 - 20:14 | 5973459 knukles
knukles's picture

God I'd love to fuck with that system......
So, Joe got fired?  Whoda known.  The little prick.  GO ON, ROOT FOR THE FUCKING BREAD LINES YA LITTLE FUCKER!

Wed, 04/08/2015 - 20:25 | 5973494 gmrpeabody
gmrpeabody's picture

I remember in the movie "Blade Runner", they had such a test...

Wed, 04/08/2015 - 20:53 | 5973567 Automatic Choke
Automatic Choke's picture

knukles..... we gotta talk.  i've got some great ideas for screwing up that system.  together we could raise hell.

 

Wed, 04/08/2015 - 21:03 | 5973601 Save_America1st
Save_America1st's picture
JP Morgan To Use Algorithms To Predict Which Employees Will Go Rogue

 

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Wed, 04/08/2015 - 21:22 | 5973649 metastar
metastar's picture

I hear the system is part of the new open floor plan with strap down electrode seating.

Wed, 04/08/2015 - 21:22 | 5973668 gladih8r
gladih8r's picture

I'm sure they'll just use it to better allocate bonuses.  The roguest of all will make out like bandits.... no pun intended.  No wait, it was intended.

 

Wed, 04/08/2015 - 21:36 | 5973713 nmewn
nmewn's picture

lol...all depends on their definition of "going rogue" doesn't it? ;-)

Wed, 04/08/2015 - 22:52 | 5973907 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

all depends on their definition of "going rogue" doesn't it?

I think I can shed a little light here:

The idea at JPM is to identify employees who are exhibiting the early signs of going rogue.

It aims to identify employees who may "go rogue". What is the common factor among employees who have "gone rogue"? They've been caught doing something they should not be caught doing, like rigging markets, ripping off clients, and assorted other illegal, fraudulent behavior.

They've been caught.

Naturally, if JPM can intervene beforehand and prevent an employee from getting caught, that employee can have a long and prosperous career at JPM. After all, an employee cannot be "rogue" if they are never caught doing anything wrong.

Wed, 04/08/2015 - 21:18 | 5973648 markettime
markettime's picture

Need a larger penis? We have an algorithm for that........

Thu, 04/09/2015 - 00:22 | 5974190 OldPhart
OldPhart's picture

I was having a juvenile chuckle over the thought of Dewar (Scotch), long lunches, business head...

Thought I'd look up the lady...yeesh! 

JP Morgan Chase has hired Sally Dewar, the former head of risk at the Free Shit Army (isn't that what FSA stands for?)

http://www.professionaladviser.com/ifaonline/news/2024811/fsa-risk-head-dewar-join-jp-morgan-chase

 

Wed, 04/08/2015 - 21:12 | 5973630 Yes_Questions
Yes_Questions's picture

 

 

 

they never caught me

Wed, 04/08/2015 - 20:32 | 5973510 kaiserhoff
kaiserhoff's picture

On a long enough time line...

Wed, 04/08/2015 - 23:09 | 5973966 blowing winter
blowing winter's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com

Wed, 04/08/2015 - 20:15 | 5973467 Rehab Willie
Rehab Willie's picture

Jamie Demon really means whistleblowers

Wed, 04/08/2015 - 20:31 | 5973508 Albertarocks
Albertarocks's picture

BINGO!  That's exactly what this is really all about.  I mean if the system was meant to detect employees who are likely to do something illegal, Dimon would be the first to go.  So obviously this is not about what they are saying it's about.  The reasoning they are providing is, in itself, a lie... exactly what JPM is all about... lying and deceiving.  Dimon deserves to be drawn and quartered, his corpse set ablaze and the ashes extinguished with the piss of honest Americans.

Wed, 04/08/2015 - 21:55 | 5973756 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

JPM Chase purchases insurance of every variety for operations and traders/managers et cetera. After all the lawsuits of late their insurance rates have likely gone through the roof compared to pre-2008 crash. Today, they have to act proactively to instill confidence in the markets that sell them insurance policies. It is likely that the insurance industry as a whole is moving towards increased behavioural assessment due to all the bankster related suicides that are on the insurance companies books as 'suicides' instead of CIA black-ops murders made to look like suicides. JPM Chase has an inordinate amount of 'suicides' on their books compared to other investment banks. ERGO, the insurance companies are likely pushing JPM Chase to act proactively or they will raise their premiums on policies. Moreover, JPM Chase takes out Life Insurance on all their employees so that they don't lose a dime and actually profit if their employees decide to take dirt naps on company time, eh.

 

NOTE: Would you sign a contract with JPM Chase if they were going to make a profit off of you being silly with a nail gun and shooting yourself eight times in the head and torso after Coke n' Hooker Wednesdays at the Wall Street Skanks n' Peelers Bar drinks after work night? Fuck no!

Wed, 04/08/2015 - 20:16 | 5973469 Fun Facts
Fun Facts's picture

The hiring algorithm only allows megalomaniacal psychopaths.

Wed, 04/08/2015 - 20:27 | 5973498 RaceToTheBottom
RaceToTheBottom's picture

I hate Tom Cruise.

Wed, 04/08/2015 - 20:20 | 5973473 1stepcloser
1stepcloser's picture

POSSIBLE RESPONSE,
YES/NO
OR WHAT?
GO AWAY
PLEASE COME BACK LATER
FUCK YOU, ASSHOLE
FUCK YOU

Wed, 04/08/2015 - 20:22 | 5973487 Infinite QE
Infinite QE's picture
corrected-JP Morgan Uses Algorithms To Predict Which Employees Will Go Rogue-corrected

 

What do you think all the banker deaths are all about?

 

Wed, 04/08/2015 - 20:27 | 5973500 Yen Cross
Yen Cross's picture

 LMFAO,   "Going Rogue" is code for  nailgun insurance...

  JPMorgue want's to have a model for employee life insurance policies. Most large corps. & banks name themselves as primary beneficiaries when an employee meets his /her untimely demise.

  The ZIRP markets are so overbought, and the margins so thin, JPM is resorting to cannibalisms. lol

Wed, 04/08/2015 - 20:31 | 5973507 FieldingMellish
FieldingMellish's picture

Here is the algo:

 

<get entire employee list>

<print>

Wed, 04/08/2015 - 21:06 | 5973606 Yes_Questions
Yes_Questions's picture

elegant, i love it.

do they still use paper?

Wed, 04/08/2015 - 21:10 | 5973626 ebworthen
ebworthen's picture

lol...yup.

J.P. Morgan Chase is a rogue bank, so this makes sense.

Wed, 04/08/2015 - 20:34 | 5973515 Niall Of The Ni...
Niall Of The Nine Hostages's picture

They could also stop hiring psychopaths with no place in a civilized society outside a lunatic asylum or a maximum-security prison under 24/7 surveillance. 

In reality it's those few people with a conscience who slip through the  cracks that they want to weed out before they sing like canaries to Zerohedge or the Russian press. 

Wed, 04/08/2015 - 20:35 | 5973517 Sanity Bear
Sanity Bear's picture

this is fucking AWESOME

 

couldn't imagine a better way to make that bunch of sociopaths miserable and paranoid

Wed, 04/08/2015 - 20:40 | 5973535 samsara
samsara's picture

I haven't read the comments yet, but someone must have mentioned that "Upper Management" is exempt from the algos.

Wed, 04/08/2015 - 20:47 | 5973556 StupidEarthlings
StupidEarthlings's picture

I think its great. Ive been in a position where i was responsible for hiring/firing. .and bossing retards around all day. (Well..not actual retarded people...the un-Pc use of the word).

Anyway..what i wouldnt give to be sure that the prospects were not gonna flake out..or at least be a 'decent ' employee for freaks sake.

If folks are kn the up and up..they shouldnt be worried. 

Take that bitches.

Oh..and if youve never been responsible for hiring dependable people before..then you have no leg to stand..and i dont wanna hear your 'opinion'.

Wed, 04/08/2015 - 22:45 | 5973890 Vooter
Vooter's picture

Wow...hiring and firing, and bossing "retards" around all day...sounds like you've really fulfilled your potential! I bet you also live in a nice house, drive a nice car, watch TV, eat in restaurants, drink, go to Vegas, watch football, and...of course...play golf. Anything else? Anything else before I shoot myself in the head out of pure, unadulterated BOREDOM?

Wed, 04/08/2015 - 20:48 | 5973558 Raging Debate
Raging Debate's picture

Fhuck em all in de azz. Isnt what it all comes down to? Tell me I am wrong.

Wed, 04/08/2015 - 20:57 | 5973574 Rabbi Blitzstein
Rabbi Blitzstein's picture

Goyim so predictable-so easily manipulated. JP Morgan is House of Rothschild front as always. Kosher controlled mass media uses NLP word ‘algorithm’ in lieu of’ manipulation’. Kosher NLP word “rogue "in article really means ‘jew-wise’. White race becoming too aware. Kosher tribe getting worried. Tribe worried goyim not so ripe for the picking. Need to propagate massive confusion. Make goyim have fear. Goyim fear gives kosher tribe power. Oy vey!!

Wed, 04/08/2015 - 21:56 | 5973759 Yen Cross
Yen Cross's picture

 Holy Shitzters~ I can't stop laughing...

 Rabbi Blitzstein       Has got to be Francis_Sawyers, evil Triplet.

Wed, 04/08/2015 - 20:55 | 5973575 Automatic Choke
Automatic Choke's picture

I love the concept of sending R2D2 into somebody's office bearing a pink slip declaring that they have been deemed a "rogue threat" and are to empty their desk immediately and proceed to HR.  Do not pass go, do not collect $200,000 bonus.

 

Wed, 04/08/2015 - 21:30 | 5973699 e_goldstein
e_goldstein's picture

By HR I assume you mean the roof.

Wed, 04/08/2015 - 20:59 | 5973581 steelrules
steelrules's picture

Oh you mean there's an App to weed out people with morals empathy and ethics?

Wed, 04/08/2015 - 20:58 | 5973589 Yes_Questions
Yes_Questions's picture

The Fucking Machines are probably going to be used to front-run those employees on their "rogue" behavior thus enhancing squid-dom at the idea level.

greed never sleeps

Wed, 04/08/2015 - 21:07 | 5973615 Downtoolong
Downtoolong's picture

December 16, 2018

Three top executives at JPM were inadvertently fired today after what CEO Jamie Dimon described as the firms first major incident of Rogue Inhouse Surveillance. “Apparently our employee monitoring system known as IPSAMA (Intelligent Personnel Surveillance, And Management Algorithm)  went berserk”, explained Dimon. “After being overloaded with thousands of examples of front running, skimming, market manipulation, and other trading misconduct across our firm, IPSAMA just cracked and retaliated by axing a few of our top employees, including me”. “We’re sure its just a bug”, said Dimon, “Our programmers are working to solve the problem quickly, hopefully before IPSAMA catches on to what they’re doing and fires them too.”  

Wed, 04/08/2015 - 21:50 | 5973744 nakki
nakki's picture

I thought that's what risk managers did.

 

Wed, 04/08/2015 - 22:13 | 5973797 Downtoolong
Downtoolong's picture

using algorithms to “monitor dozens of inputs,” like measures of excessive risk-taking…

and anything and everything they post on their Facebook page.

“We’re into that”, said Mark Zuckerberg, CEO of Facebook. “If JPM is willing to pay, we’re willing to play. That goes for other corporate clients who want to deal with their Rogue problem too. We can easily develop a Rogue Index for any user based on facial scans, email and comment analysis, add clicks, travel behavior, and, of course, their interaction with other rogues.” “This could become a whole new market for Facebook”, said Zuckerberg, “We’re anxious to become the leader in Rogue User Identification and Labeling.”

Wed, 04/08/2015 - 22:19 | 5973817 Big Brother
Big Brother's picture

I just want to point out to all those unfamiliar with the short story "Minority Report" and the book "Do Androids Dream in Electric Sleep" upon which the movie "Blade Runner" is based that book were written by the same author, Philip K. Dick.

Interestingly, the Minority Report program fails when the "Police Commissioner" who reads each of the engraved, wooden spheres as they're produced, finds out the outcome changes after the perpentrator (himself) reads of each incremental pre-cog finding (3 total).  Thereby, the guardian of the information invalidates the performance of the system; the only way it can fail.

So, assuming the CEO (Jamie Dimon) is the guardian JP Morgans "Pre-Cog" algorithm, only when he is found to be a rogue trader, miss compliance classes, double-dip a potato chip, does the whole prevention-ex-machina fail. 

Methinks upper management at JP Morgan also reads Philip K Dick stories.

Anyway, Two of my favorites.  I just finished "Flow My Tears the Policeman Said".

Thu, 04/09/2015 - 05:20 | 5974456 Arnold
Arnold's picture

Hush, we'd rather our Dick secret not be widely known.

Well that was an awkward sentence................stop digging the hole ..........

Crap that line really sucks........

Uh , Insightful author.

Wed, 04/08/2015 - 22:20 | 5973822 Mr. Bones
Mr. Bones's picture

Skynet became self aware on August 29, 2013.  I should probably commit more of the Voight-Kampff test questions to memory.  Perhaps test them against cleverbot.  What do I do if it calls me Dave and apologizes for not letting me do that?

Thu, 04/09/2015 - 05:12 | 5974454 Arnold
Arnold's picture

Change your name and have a thumbtack handy during questioning.

Wed, 04/08/2015 - 22:31 | 5973839 Vooter
Vooter's picture

I wonder if they have any algorithms that can predict which employees will die of cancer...

Wed, 04/08/2015 - 23:06 | 5973953 SweetDoug
SweetDoug's picture

'

'

'

Quis custodiet ipsos custodes?

 

•?•
V-V

Wed, 04/08/2015 - 23:16 | 5973991 DipshitMiddleCl...
DipshitMiddleClassWhiteKid's picture

logistic regression...cart...c4.5..random forest..derp

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