Trading robots



I have a son who has been working as a sports trader in a BPO firm since his graduation. The position title is a euphemism of sorts because it actually entails setting the odds on foreign games and taking trades while the game is ongoing. The odds are actively reset while the game is live, taking into consideration the competing trades on other sites to avoid arbitrage, the rhythm of the game, as well as the physical conditions of the players.

They are not allowed to take local positions nor are they allowed to take personal positions themselves. Each transaction has to be matched abroad with a counterparty or with the house taking the counter position.

When I mentioned this to a banker friend of mine, he was immediately excited because he apparently did this for NBA games in the States when he was younger. He told me that he needed this competency in treasury as it had the same banking applications. He requested me to relay this to my son once he was ready to move. I told my son about this more than a year ago, but he was and apparently still is having fun, so he still works for the same BPO. This is despite the variable work shifts that he has to take to match the different schedules of the foreign games that are assigned to him.

I recently asked him if his company has started deploying robots to handle the trades. Curiously, he mentioned that robots have started to take over some of the basketball games. I am guessing that the algorithms for basketball are simpler. The calculations and the reasoning process are easier. The physical conditions are not as variable since you could replace tiring players. The robots can probably spot the changes in the competitor gaming sites faster as well.

I also noticed a growing trend in automated stock trading. I see this in the growing TV advertisements on Bloomberg. An automated trading system is simply a robot that creates orders and automatically submits these to an exchange. The program will automatically generate orders based on a pre-defined set of rules using a trading strategy that is often based on technical analyses. It can also be based on inputs from other electronic information sources such as the competing gaming sites that were previously mentioned. Automated trading systems can execute repetitive tasks at speeds with orders of magnitude greater than any human equivalent.

Interestingly, I saw an advertisement that matches trades at mid-point so one does not have to buy at the high side or sell at the low side. The ad presupposes that a transaction involving human intervention could motivate a trader to pocket the difference. I understand that more than 75 percent of trades on the US exchanges already originate from these automated trading systems.

I am certain that trading robots will soon dominate the different markets that sell financial products, commodities, or even the gaming sites. I am also confident that other opportunities will arise in programming these robots and setting the complex algorithms that go with these trades. There are, of course, questions on whether we are all ready for these changes.

Ronald Goseco is currently executive vice president at the Financial Executives Institute (FINEX) and President of IDI-VW.



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