A Predominantly Automated Financial World

Quite obviously, the development of robots and AI machines is changing the world we are living in today. Our society is becoming more reliant on automated systems to complete tasks that were otherwise handled by humans. Automation has had both positive and negative effects on human society. In many circumstances, automation has allowed tasks to be completed at the flick of a switch. In other words, time-consuming tasks that required extensive manual human effort can now be done much more easily and in far less time. However, automation also means that AI machines’ operations are replacing human functions, therefore human jobs. For example, highway cash toll booths with employees have been replaced with EZ-Pass booths that automatically scan your EZ-Pass or car license plate number and send you your bill to your home address. In addition, many stores have installed self-checkout kiosks to speed up the checkout process and also cut down worker salary expenses by having automated machines run without employees. While this has led to greater efficiency, it has also resulted in a shortage of human jobs leaving people to struggle to find employment.

In the same way that AI-activated machines have become part of our world increasing automation and the speed at which tasks are done, robots will just as quickly assimilate into our society and change the structure of our financial system and the tasks of the people involved. While some may believe that robots will be able to improve the speed and accuracy of financial calculations, others argue that robots are an inevitable advancement that will result in corrupt practices in the stock market, thus resulting in more harm than good.

Currently, it is unclear to say exactly how robots will interact with the stock market and how humans will respond to these automated systems participating in trading operations. However, we are certain that the development of robots will affect the stock market in several ways. Robots working in stock markets will result in more frequent algorithmic trading. Algorithmic trading is when computer programs with a set of instructions are used to place a trade in the stock market. These computer programs have the ability to work at a much faster pace than that possible of a human trader, thus leading to greater trading profits. Additionally, robots will be able to track the highs and lows of multiple stocks simultaneously at a speed that humans are unable to achieve. Algorithmic machines have already dominated global markets with the rise of advanced technology in the last decade. In the next couple of decades, with new improvements, algorithmic robots are only going to become more proficient at trading efficiently making it extremely difficult for human traders to trade successfully. Algorithmic trading is known for causing constant fluctuations in stock prices because it allows there to be large orders of an asset either to be bought or sold very quickly and this significantly raises or lowers the price of the asset. When there are constant fluctuations in the stock market, traders are unable to make reasonable assumptions on the future value of certain stocks because of the extreme short-term volatility in the market (Sozzi, Brian). This constant volatility in the market leads traders to put resources into unfruitful accounts. It seems that with more advanced algorithmic robots in the future, successfully trading the stock market will become even more difficult and result in undesirable outcomes if the risks from price volatility are not taken into account when forecasting the value of assets for trading plans.

In addition to the impact on market volatility, robots will also allow for the spoofing of stock and bonds to be done more frequently. Spoofing is an illegal form of market manipulation in which a trader places a large order to buy or sell a financial asset, such as a stock or a bond, with no intention of executing. In doing so, the trader, or the spoofer, creates an artificial impression of demand for the asset. Depending on what the spoofer decides, the tactic can raise or lower the prices of assets. Spoofing is already a major issue that allows firms to illegally generate profit by buying an asset and then immediately selling it, shifting the market demand to extreme lows or highs and with algorithmic robots, it will become even more common. According to the Commodity Futures Trading Commission (CFTC) and the Security and Exchange Commission (SEC), manipulating the markets is not tolerated and those that engage in trading misconduct will face serious consequences. However, large firms are often able to avoid the consequences by settling charges equal to a value much lower than the profit it generated and the impact it had on the market by spoofing. One example of this is JP Morgan Chase which was involved in the spoofing of Treasury bonds and notes for at least eight years. Trading authorities were not able to track the spoofing activity that the traders were involved in until eight years later. After the eight years, JP Morgan fired the traders involved in spoofing and paid $920 million to settle the charges which impacted the firm’s shareholders to the greatest degree because their share price went down (Monica, Paul R. La). This shows that with the development of algorithmic robots, a greater number of spoofing transactions can be executed resulting in constant shifts in the demand of assets in the market making it more difficult for investors to make rational decisions when buying or selling a stock.

       The way stock market trading is currently performed is likely to change in the next few years. While some negatives to stock market trading in a world with algorithmic robots have been drawn out, there are areas where algorithmic trading will demand for human skills such as judgement (Gans, Joshua). Algorithmic robots will be proficient in providing timely calculations, and predictions based on new information, but for the more complex objectives, algorithmic robots will not be able to replace human trading operations. Therefore, human traders will always be required for the more innovative tasks. What will change is the role of traders in the stock market. Previously, traders were hired at a firm for their ability to quickly analyze data and provide predictions but since these activities will be handled by robots, traders will need to be more skilled in providing the firm with value that robots are not capable of giving. In spite of the positive impact this will have on the productivity of firms, it will make it more competitive for future traders to enter the financial industry.

       However, since we have passed the time where we could have departed from such AI machines, it is not about whether we want these robots in our society or not but it is about how we control them when they do enter to ensure that they do not disrupt human lives. We, humans, will need to find a way to tackle the situation and adapt ourselves to these new advancements. Further, to prevent possible corrupt practices in our financial markets, we need to make certain that there are guidelines and policies that robots must follow. While it may seem that robots will be capable of taking over jobs in investment banking, a field that the human race already has difficulty finding jobs in, with more and more automation, the demand for personalized human-touch in transactions will rise again. Also, since the development of robots and AI machines will first require humans to construct them, greater demand in these automated machines will call for more people experienced in STEM fields  

Again, algorithmic robots may seem to be a major threat to trading jobs. While in some ways robots will take the role of human traders, they will also create jobs for humans in other fields, as mentioned above. For algorithmic trading to function, it requires specific programs created by skilled humans. Additionally, while AI machines excel at interpreting and reacting to new information in the stock market, relying solely on them will result in a loss of opportunities that only competent traders can see. Since skills like human judgement cannot be substituted by functions of an automated machine, algorithmic robots will actually raise the value of complementary human skills. For this reason, humans will always have a competitive advantage over robots in real innovation and judgement, places where the objective is too complex for robots to understand.

This is not: an argument for one side or a veiled argument for one side, a research paper, a report, or a summary.  It is your philosophical inquiry fueled by multiple perspectives and concrete examples. It is similar to a deep train of thought.

1) Brainstorm ideas, perspectives, and examples on your question/topic to suggest ideas to your partner. Write three strengths of the Project.

2) Is your author drawing from their own opinions, experiences and knowledge of the world? How can the author develop their perspectives?

3) Does the author discuss multiple perspectives and counterarguments?

4) Are the author’s points clear? How can the author make the points clearer? Are there examples that would make the points clearer?

5) Does the author use examples to illustrate ideas? Can you add examples?

6) Are there transitions that signal the reader? Do my points build on each other? Does one idea lead to the next? Is there a cohesive flow that develops specific ideas?

7) Are important terms defined and potentially redefined?

8) Is this an inquiry, and not an argument with an answer from the start?

9) Do I come to a conclusion that builds on my ideas?

10) What questions or suggestions do you have? Make sure to tell your partner if you think they are making an argument rather than an inquiry. To fix this, your partner should include multiple perspectives and counterarguments.