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In May 2017, the Bank for International Settlements and the world's heaviest hitting central banks produced the Definitive Guide to Acceptable Behaviour for Traders in what was once considered the Wild West of financial markets - currencies. But are there any humans, particularly experienced humans, left in this business? A market that's worth $5.1 trillion a day.
Currency trading desks have had something of a clear out over the past five years due to unethical behaviour. Globally, banks have cut some 30% of staff from the business areas that include currencies since 2011. It's not just those tainted by scandal who have left. A lot of the more experienced and expensive traders have also headed home in the name of cost-cutting. Juniorisation, they call it.
Filling the gap are inexperienced traders and robots. For every director with 10 or more years on the job, there are now up to seven less experienced staff on currency desks. A ratio that used to be 1 to 4, just five years ago. XTX Markets for one, employs precisely zero human traders and it has managed to become a top 10 market maker. Goldman Sachs says one computer engineer can do the work of four traders, and it now employs 9,000 computer engineers, about a third of its staff.
Robots are much maligned as a potential source of flash crashes, but it's hard to find firm evidence they're really rocking the boat. Maybe the kids should be a greater source of concern. For example, the BIS Report pointed out that inexperienced hands were at the centre of a flash crash in sterling last October, in which the currency crashed 6% in two minutes. Rulebooks are fine, but sometimes there's no substitute for the old goat.
