JPM Develops A.I. Robot To Execute High Speed Trades, Put Humans Out Of Work

Tyler Durden's picture

With high-margin FICC revenues stuck in a secular decline across the financial industry, banks are forced to extract as much profit as possible from existing product lines. Which explains why JPMorgan will soon be using a "first-of-its-kind robot" to do away with carbon-based traders altogether and execute trades across its global equities algorithms business using a "robot", after a recent trial of JPM's new artificial intelligence (AI) program showed it was "much more efficient than traditional methods of buying and selling", the FT reports.

JPMorgan, the world’s biggest bank by revenue, believes it is the first on Wall Street to use AI with trade execution and said it would take rivals 18 to 24 months and an investment of “multiple millions” to come up with similar technology.

The AI — known internally as LOXM — has been used in the bank’s European equities algorithms business since the first quarter and will be launched across Asia and the US in the fourth quarter, Daniel Ciment, JPMorgan’s head of global equities electronic trading, told the Financial Times.

In the latest victory for robot kind over humans, LOXM’s job will be to execute client orders with maximum speed at the best price, "using lessons it has learnt from billions of past trades — both real and simulated — to tackle problems such as how best to offload big equity stakes without moving market prices."

In other words, one giant "big data" aggregator, using historical precedent to guide future decisions, which coming in a time when "this time it's certainly different" for the broader stock market, could be a big mistake.

“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,” said David Fellah, of JPMorgan’s European Equity Quant Research team. Mr Ciment said that, so far, the European trials showed that the pricing achieved by LOXM was “significantly better” than its benchmark.

The development guarantees another round of downsizing among bank front offices as increasingly inefficient human traders are removes from the equation... and payroll. As the FT notes, investment banks have been increasingly using AI, automation and robotics to help cut costs and eliminate time-consuming routine work. "For example, UBS’s recent deployment of AI to deal with client post-trade allocation requests, which saves as much as 45 minutes of human labour per task. UBS has also brought in AI to help clients trade volatility."

Commenting on the launch, Ciment said that “best execution is becoming more and more important to clients,” adding that it could become part of the marketing pitch the bank makes to clients.  The AI was developed using “Deep Reinforcement Learning” methods, which are able to learn from millions of historic scenarios. Mr Fellah said DRL had “many other potential uses in banking, such as in automatic hedging and market making”.

One possible evolution of LOXM is teaching the machine how to get to know individual clients, so that it could consider their behaviour and reaction as it decides how to trade. “Any customisation would only be if the client agrees to that,” Mr Ciment added.

Unlike similar robotic advancements on the buyside, especially at Blackrock which is increasingly automating stock-picking using "big data" and robots in a wholesale push for passive investing, JPMorgan’s AI has no decision-making capabilities around what is bought and sold - a differentiation from existing robo advisors - as its role is solely to decide how things are bought and sold.

JPM also said it had no risk management issues with the technology. “The machine is restricted in its trading behaviour, as it learns under, and operates within, our general electronic trading risk framework, which is overseen by internal control groups and validated by regulators,” Mr Fellah said.

Of course, with such rapid propagation of technology among both stock investing and trade processing, it is only a matter of time before a "black hat" hack takes place, and sends trading - and markets - haywire. Which, incidentally, may be among the reasons for the concerted push: after all what better way to avoid blame for what is coming than to blame it on, who else, Russian hackers.

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More_sellers_than_buyers's picture

Fuck You JPM.. See how well that works when everyone does it

Arnold's picture

Can't unplug it from the wall when it runs a muck, huh?

Oldwood's picture

Computers getting to know their clients.


The smart folks of the world have tried to develop their skills of "getting to know their clients" for a thousand years or more, so as to better manipulate us and be able to predict our behaviors. Of course the job of predicting is so much easier when you control the inputs.

AI stock market predicting what USED to be unpredictable. That ship has already sailed.

BTFD folks! Whatever will be will be. It is important to understand what we can control, what we can't and what the "plan" actually is.

virgule's picture

This is a good one: "our AI system is much better than humans". How exactly can they come up with a failable test to demonstrate this statement?

Ghost of PartysOver's picture

And another dagger in the back of fundamentls,  JPM will move markets more then ever. 

Get your ticket to the Greatest Battle Bot humans have eve seen.  Only a matter of time before someone creates a handheld EMP that has a range limited to a couple of blocks.  AKA WAll Street.

Stuck on Zero's picture

So, when this machine goes crazy and loses $60 million in two milliseconds do we call it a "fat transistor trade?"

asteroids's picture

Will this be an "honest" robot, or "dishonest" robot. Who goes to jail if its the latter?

OverTheHedge's picture

Is the logical conclusion to this nonsense huge multinational conglomerates with not one single human being in the system? Vast trading and manufacturing networks producing and consuming raw materials, with humans on the outsider looking in with bewilderment, wondering what the bots are up to.

"I'm getting too old for this shit"

cheech_wizard's picture

The true cygnus atratus event, coming to a stock market near you.

Slomotrainwreck's picture

Nobody trades faster than humans. Nobody can be fired  for making bad decisions. Nobody will crash the market. Mr. A. I. Nobody deserves a raise!

HRClinton's picture

The 'Good News is, that the soon to be unemployed traders can either start their own version of ZH, or freelance for it.

TuPhat's picture

"Mr Fellah said DRL had “many other potential uses in banking, such as in automatic hedging and market making”."  What he really meant is that 'We are no longer in the banking business,  we simply play at the casino with our AI".

GotAFriendInBen's picture

Fake money

Fake traders

Fake analysts

And this is a market??????

divingengineer's picture

When they came for the traders, I said nothing.

Hyjinx's picture

Robotrader is fucked! Or was he an AI?!

stitch-rock's picture

Is there a robot guillotine?

logicalman's picture

A bucket of water would be very effective. Cheaper and more easily available.

Pernicious Gold Phallusy's picture

The robot Madame Lafarge is automatically knitting in the wine shop with a computer kiosk instead of a clerk.

True Contrarian's picture

Resistance is futile.

Arnold's picture

So much for Asimov's three laws.

Plus the 4 th.

A robot may not harm humanity, or, by inaction, allow humanity to come to harm.

hoist the bs flag's picture

that's because Asimov's laws are a work of fiction.


nothing TRUMP can't handle though.


Arnold's picture

Yet for eighty years or more, they formed the basis for the development of our Digital Overlords.

HRClinton's picture

"Peddling fiction" was in Asimov's (((DNA))).

Slomotrainwreck's picture

We need a constitutional ammendment for Asimov's laws. Wait. What? The Constitution is obsolete? Nevermind.

Arnold's picture

It's in the Bill of Digital Rights

Right before the 'And it's gone' and All Your Return on Labor Is Ours amendments.

THEBORG's picture

We are the Borg, resistance really is futile, you frail cohesion lacking carbon based units are only good for assimilation to perform sacrificial duties, and to be ground up for resources. AFter all, you humans have the same number of genes as a worm, and less than a tomato. No wonder why you are so roach like.

HRClinton's picture

If you do it right, you'll find that "Resistance is fertile".

Ask (((those))) who have resisted assimilation for thousands of years. And who now rule over you in the US.

vesna's picture

I somehow miss Navinder Singh Sarao. Hi was faster and more intelligent than any AI fucked up machine.

Son of Captain Nemo's picture

Lets call the new application "Shlomo" and have he and Aida ( "tie the knot"!

(breaking glass) MAZEL TOV!!!

Rebelrebel7's picture

Penny wise pound foolish imbeciles alienate their sole remaining defenders! That was stupid! They will join my side now to repeal the Federal Reserve Act of 1913!

Son of Captain Nemo's picture

"Penny wise pound foolish imbeciles alienate their sole remaining defenders! That was stupid! They will join my side now to repeal the Federal Reserve Act of 1913!"

But first some music!

Hyjinx's picture

What will become of the hookers & blow market? Sounds "deflationary."

Arnold's picture

Feed me carbon life form!!!!!!!!

HalinCA's picture

Good point ... robots don't get bonuses to waste on fancy cars, Hampton beach houses, or trophy wives ....  very deflationary, indeed ...

ReturnOfDaMac's picture

Thought I was clever and bought GS, should have trusted Jamie....

Son of Captain Nemo's picture

What will become of the hookers & blow market? Sounds "deflationary."

they'll all be dead because they don't have bunkers

George Soros will hand pick the best pieces of ass to work in his underground crib for free with the proviso that if "they want to stay alive"!...

williambanzai7's picture

This is basically a next generation Ponzi scheme. You give them your money and they can't explain to you how your return will be generated because it is proprietary. So it is one big covert black box. Bernie's dream machine.

All modelled after the Feds open market trading operations no doubt.

Everything is gamed so the TBTF club never reports a daily trading loss.

If you are one of the entitled super high net worth individuals, you would be nuts to park your assets anywhere else.

And that is how it works folks...

Son of Captain Nemo's picture

"This is basically a next generation Ponzi scheme. You give them your money and they can't explain to you how your return will be generated because it is proprietary. So it is one big covert black box. Bernie's dream machine."

And with that observation...

Some people really deserve what comes to them when they cease to "question" what is being done to them!

williambanzai7's picture

Some people certainly do, others haven't got the foggiest of what is going on.

They sit around wondering why their measily bank account pays zero interest.

Meanwhile these motherfuckers are laughing in their sleep.

One big club indeed...

Luckhasit's picture

Yea well, when the bread and circus stops, i'll be that voice that leads the mob to Constitution Avenue, Washington, D.C.  I'll make sure to yell "Radio!!" when i throw my trashcan.

Son of Captain Nemo's picture

Say when brotha...

I've been to many activities in "Hell" which is where I live as well and the last one that numbered more than 300,000 was when we had the anti-Iraq invasion protest in 2003.

After that, it's been 300,000 to more than a 1,000 separate protests in the last 14 years (collective)

I'll say it again. At this point in our time and crisis you'll have "to raze the capital in order to save the capital"...

Given where we are anything less "WILL NOT DO"!

Let me know when you find the volunteers to make that moment happen.

vesna's picture

Totaly agree. When the crash comes AI will be guilty so you prosecute imaginary bullshit. Fed steps in and bails out MARKET meaning becomes 100 percent owner of all companies. Maybe Buffet can go on with his Berkshire :)

c2nnib2l's picture

I can see that robot registering on ZH soon and posting FUCK YELLEN under every post 

junction's picture

JPM is changing its name to SkyNet. 

hoist the bs flag's picture

no problem...nothing TRUMP shovel ready jobs can't fix



hoist the bs flag's picture

no problem...nothing TRUMP shovel ready jobs can't fix



silverer's picture

Capitalism is the best system, but the government has distorted the mechanics of it and perverted it to the point of being dysfunctional. Take the government out of the picture, and the barriers of entry to business, and the nonsense regulations, and the cost of government compliance, the favoritism and the systems in place to allow monopolies, the union control of government labor, and the perversion of the financial system by central banks and the resultant destruction of an honest money system, and things would be a lot different.