THETRADETECH DA I LY
in-depth
THE OFFICIAL NEWSPAPER OF TRADETECH 2019
“One challenge to keep in mind is a trade off in the realm of data management.
There is a fine line between cost savings on the employee side and incurred costs of
large data mining systems.”
LARISA MATHUR, VNR PARTNERS
AI is not going to be able to bail us out when
such instances transpire and if everyone uses
AI then who has the advantage? There is no
consensus on the best AI poker programme,
and it’s not clear which one would win in a
“head to head”.
Tom Doris, chief data scientist at Liquid-
net, points to a consensus on the buy-side
that AI is the “way of the future” and that
the industry will see a fundamental trans-
formation in the next three-to-five years. He
notes, however, that fundamental trans-
formations often take a little longer than
expected and suggests seven years as a more
realistic timeframe.
Blind spots, of course, remain. AI offers the
possibility of gathering online user feed-
back for new product launches to quickly
determine whether the company behind it is
looking at a hit or a miss. AI has a particularly
hard time spotting sarcasm: what reads as a
straight thumbs up from a widely followed
social media pundit may in fact be a wither-
ing thumbs down.
Problems such as sarcasm, Doris says,
mean that “a high degree of scepticism is still
needed. The human decision-making process
is still central to wealth and risk manage-
ment. I wouldn’t want my money managed
by algorithms.” AI, he says, is nowhere near
achieving a human level of understanding.
The hypotheses and assumptions that are
used by AI, he says, will continue to depend
on what is important to human beings; the in-
dividual and collective mechanisms through
which we as humans use to adjust the narra-
tives which we construct to understand the
world, and the trading universe, are still far
from being understood.
Doris also takes a different view to Smith at
Rosenberg on the impact of AI and automa-
tion for buy-side jobs, arguing that a lot of
desk-assistant type roles have been down-
sized. Consolidation, however, has been the
leading driver of lower headcount. “Anything
that can merge will merge,” he says. Doris
suspects that this process may be close to
its limits, with buy-side firms now “about as
skinny as they can be.”
Managing data sets
Paul Spencer, chief operating officer at
Velocimetrics, has been in discussion with
developers of AI systems and the trading
organisations who intend to use them. He
consistently hears that the recognition
that AI and machine learning can only be
effective if the systems receive an accurate,
real-time view of the transaction flows
as they are occurring within a complex
trading platform. “The ability to process
time-stamped trade flow events captured
independently from the platforms that are
being monitored is of paramount impor-
tance,” he says.
Larisa Mathur, managing partner at VNR
Partners in Miami, cautions that developing
artificial intelligence projects “can get quite
complex and go out of control quickly.” VNR
Partners is a proprietary algorithmic forex
trading shop, which has had success in using
advanced methods in parts of the process
where speed and dependability are critical,
yet outcomes are clear.
“If there is clarity of thought and re-
quirement placed to AI, and a well-defined
context, AI projects help support the overall
strategy,” Mathur says. “However, it takes a
lot of work. One challenge to keep in mind is
a trade off in the realm of data management.
There is a fine line between cost savings on
the employee side and incurred costs of large
data mining systems.”
Rosenberg’s Smith agrees that time is a key
constraint in determining whether a data set
should be used. He is confident that AI will
have a role in the future in doing this. “If we
can automate it away, we’ll try to do it”, while
Doris at Liquidnet believes that the debate
on AI has progressed from 18 months ago
and is now more nuanced than the previous
positions of total acceptance versus outright
scepticism: “You never progress from a posi-
tion of fear.”
Issue 1
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