Future of IT: Investment bank Goldman Sachs will appoint its CIO as Deputy CFO. Incongruity? No, a simple consequence of the computerization of the bank's trades. With automation, many jobs are being trapped.

Computer automation is progressing at Goldman Sachs, and "even the masters of the universe are under threat" assures the MIT website. The article discusses the introduction of software that changes the way finance and its most powerful players work. Above all, it seems that this transformation totally reorganizes the ecosystem: profits are now captured in their overwhelming majority by the top executives of the company: the algorithms never claim their due.
In 2000 the stock trading office at Goldman Sachs headquarters in New York employed 600 traders. Employees whose job was to buy and sell these shares on orders from major clients of the investment bank. Today, there are only two. Computerized trading programs automate the rest of the work. With the support of 200 computer scientists.
Investment bank to be transformed
Marty Chavez, former CIO of the bank, will become deputy chief financial officer of the company in April, who recently reported on this major change in the financial world at a symposium organized by Harvard University.
The revolution of high frequency trading dates back a few years, but this new movement is an additional proof (if need be) of the upheaval that the digital transformation proposes at Goldman Sachs as at his colleagues on Wall Street.
Marty Chavez says that it is no longer just the currency market or shares that are affected by automation. The investment banking trades follow a similar path. "Everything we do is assisted by mathematics and a lot of software," he says. And it is not the small hands that are threatened by the machines: the high wages should soon make their suitcase face the digital wave.
Imitate as faithfully as possible what a trader would do
Coalition said that the average salary of employees in sales, trading and research positions in the 12 largest global investment banks (Goldman Sachs being the # 1 bank) is $ 500,000, Including bonus. But this figure is misleading. 75% of all compensation for Wall Street employees is captured by very high salaries, says Amrit Shahani, head of research at Coalition.
For these high-end profiles, revenues continue to grow year after year, reflecting according to Tom Davenport, professor at Babson Collegen, the consequence of automation. "The salary of Goldman's CEO will probably be even more important (in the upcoming period), as there are fewer lower-level staff with whom he must share profits," he said.
Complex trading algorithms, sometimes equipped with machine learning capabilities, have replaced in the first place trades where the price of what is sold is easy to determine in the market. This is the case of shares traded by the 600 traders of Goldman Sachs. From now on, new trading activities such as currencies and futures, which are not traded on a stock exchange and whose prices fluctuate, enter into automation projects. To place orders, the algorithms are designed to mimic as faithfully as possible what a trader would do, says Amrit Shahani.
Four traders for a computer engineer
Goldman Sachs has already started to automate currency trading. Besides, blockchain and big data technologies are also involved in the banking world. In this context, the bank has acquired the certainty that four traders can be replaced by a computer engineer. Approximately 9,000 people, or about a third of Goldman Sachs' staff, are now computer engineers.
Coming next, according to Marty Chavez, automation of the work done in investment banks, a work traditionally based on the skills of employees in sales and customer relationship monitoring. For the time being, this land remains the realm of the "rainmakers", these super sellers able to find new wealthy clients able to grow the activity of the investment bank. The ex-DSI says however that if these very high profiles "will not be completely replaced", the bank takes the lead: Goldman Sachs has identified 146 distinct steps of their trade, many of which "can be automated".
Reducing the number of bankers in investment banks would in fact be a significant saving for the company. These bankers work on mergers and acquisitions of companies, for an average annual remuneration of $ 700,000 according to Coalition. And in a good year they can earn a lot more.
Marcus, 12 months, and a startup spirit

Goldman Sachs' new digitized consumer loan platform, named Marcus, whose goal is to consolidate credit card balances, is another example of the magnitude of the automation work. Software, without human intervention says Marty Chavez. The project started just twelve months ago in the manner of a startup, he explains, housed in a space left empty by the 600 traders who left the company.

By Guillaume Sierries, on zdnet - February 7th 2017