UBS’ latest AI push may lead to robots invading trading world

Maria Nikolova

Whereas many banks have already been replacing back-office staff with robots, UBS seeks to implement AI solutions in front-office roles, with robots to perform tasks related to trading strategy optimization.

The fact that an increasing number of financial services companies are using artificial intelligence (AI) solutions in back-office roles is now barely surprising. But UBS AG (SWX:UBSN) is taking this trend further and is exploring further application areas of AI in its front-office.

According to a report by the Financial Times, the Swiss bank is about to take robots to trading floors. The company has shown how two AI solutions can assist traders in enhancing their performance.

The first program, developed in collaboration with Deloitte, deals with clients’ post-trade allocation requests. The program scans for clients’ emails describing how they would like to allocate large block trades among funds. The system then processes the data and executes the transfers. According to UBS, the AI system performs a task that would usually take a person about 45 minutes in only about two minutes.

The second of the new solutions uses machine learning to develop new strategies for trading volatility on behalf of clients. It scans vast amounts of trading data and creates a strategy based on learning from market patterns. The strategy, however, has then to be approved by human employees.

According to Beatriz Martín Jiménez, chief operating officer of UBS’s investment bank, who was quoted by the FT, it would take “several years” before computers would be allowed to execute trades without them first being approved by human bankers.

Earlier this year, Marty Chavez, Goldman Sachs’s deputy chief financial officer and former chief information officer, explained that automated trading programs have taken over the bulk of the work performed by human traders at the company’s US cash equities trading desk in New York. He then noted that there were only 2 equity traders working at this desk, compared to 600 traders in 2000. Mr Chavez also forecast that currency trading and certain parts of investment banking will follow suit.

Goldman Sachs has already begun to automate currency trading. The findings are dismal for traders, as four traders can be replaced by one computer engineer, according to Mr Chavez. Currently, approximately a third of Goldman Sachs’s staff are computer engineers.

Online trading companies are also increasingly focusing on AI solutions for enhancing trading results and the overall trading experience. There are a number of examples in this respect in Japan. In April this year, for instance, Japanese Monex Inc, a subsidiary of Monex Group, Inc. (TYO:8698), has announced the start of delivery of a new market analysis report, based on the work of an AI program. The service is a result of the partnership between the broker and fintech company Good Moneyger.

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