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Lifehacks for when a robot wants your job Posted on : Jul 14 - 2018

The threat from automation is in the flows part of banks’ global markets business, the most important chunk of the biggest division of investment banking

Can’t code, or speak Bahasa? Didn’t go to school with a CEO’s son or daughter? A robot will take your trading seat. Read on if you want to save your job.

The threat from automation is in the flows part of banks’ global markets business, the most important chunk of the biggest division of investment banking. Investment banks garner 70% of their revenue from global markets, made up of trading stocks and bonds, as well as structuring derivatives products and financing; the remaining 30% comes from advisory services like shepherding M&As or helping companies raise equity and debt.

The higher-margin areas within markets — from structuring to swaps — is relationship-oriented, and therefore (relatively) safe from robot overlords. And it happens to be a big contributor to the 70% pie, especially in Asia, where commissions on equities and fixed-income trades are sinking fast, and language and client connections play a big role. Good news? Read on.

With the flows business comprising 51% of banks’ global markets revenue of $109.8 billion last year, according to Coalition data, automation of even vanilla trades is no small threat. Besides, the 30% advisory pie of investment banking revenue outside global markets only pays well when banks counsel on large cross-border transactions or underwrite big IPOs.

In Asia, the former is largely a Japanese game since China pulled the plug on deal-making by its overly ambitious conglomerates. And large share sales only happen in a few markets. India may be the second-biggest destination for cheap Xiaomi phones, but the Chinese firm’s Hong Kong IPO probably made more for banks than the entire Indian equity advisory industry will earn in fees this year, as a senior finance executive told one of us.

Desks have already shrunk, and will get smaller still. A decade from now all trading will be electronic. Last year, JPMorgan Chase & Co. chairman Jamie Dimon famously boasted of a currency trader that made a $100 million bet via a cell phone. That’s the shape of things to come.

In contrast to the early days of the 2008 financial crisis, when tech was culled to cut costs, digital upgrades are now seen as both an operational necessity and a strategic differentiator. Tech spending in global-markets divisions of investment banks has risen to $16.5 billion at the 12 institutions Coalition canvassed, from $13.8 billion in 2013. A chunk of that is maintenance of bulky legacy systems, but Amrit Shahani, a London-based research director at Coalition, says large Wall Street and European banks are each spending around 10%, or a giddy $1 billion of their annual revenue, to stay relevant. View More