Hi, Just a bit of a thought experiment really. In my 15 years in the markets it has changed so much, these are some of the changes i think that made the biggest impact, on me at least, but if we have a crystal ball what will the next 10 years bring? When i first joined there was a lot of ex pit guys moving to the screens which was a huge change for them. The screens were mostly humans trading with humans (well compared to these days) then from about 2009 it seemed to be entirely machine based trading. Then after the financial crash the regulations put on banks changed a lot of the flow in the markets, there was less and less block orders going through and volumes traded really went down. Then in Europe,at least, the MiFID regulations killed a lot of access to leverage, as a professional you need to partner up with firms located outside of the EU to get professional leverage now as the margin rates went through the roof. Looking forward I think there will be more taxes on traders, a financial transaction tax, purely because traders are easy targets, the media just assumes every trader is a rich sociopath that prints money they click a button with no skill and that's an easy win for politicians to try and raise money here. I wouldn't be surprised if there will be a lot of new contracts based around eco friendly products, green bonds, solar futures etc. I think volumes will drop in a lot of traditional products like stocks and bonds as the economy changes, there will be more peer to peer contracts using blockchain etc. How about you guys? Will trading become a larger and larger part of the world economy? Or less and less as people still try use 2008 as an excuse to totally transform capitalism?
Many people currently struggle with trading so more retail will just go buy ETF's in the future. Fund managers will wane as ETF's bring similar returns for stakeholders with less fees. The more ETF buying the more skewed money goes into large caps and or stock prices don't make financial sense, P/E's climb higher. Stock market will exist for many years to come as it is the backbone to most retirement funds and therefore has government support.
i think the fed will start blasting the $$ out which will be a firm operating environment for sustainable etfs on a medium to long term event horizon. on a cosmological timescale sustainabity concerns will dominate.
This: Looking forward I think there will be more taxes on traders, a financial transaction tax, purely because traders are easy targets, the media just assumes every trader is a rich sociopath that prints money they click a button with no skill and that's an easy win for politicians to try and raise money here.
i expect more fixing scandals. if bank A needs to sell 1bn GBP to bank B at 4pm they should do so in a disorderly way to protect the consumer. finding the offsetting position is fixing or collusion.
5% would be etf bullish id imagine and the market would likely behave more correctly. i also like the auction once a milisecond idea. possible once a month would improve fundamentals.
IMHO trading automation will bubble to the top of the food chain. It's already here but not useable by per mortals. It'll become more intuitive, easier to adopt to personal trading strategies. Less programming will be involved.
i would predict banks spending 100 million to move or upgrade risk and execution systems to on the line (internet is fast and unlimited) guis to be more interactive for traders who are partially sighted
Is there any other equivalent of a superpower technology/knowledge that "mortals" have tamed? Medicine? No. Programming? No. Nothing in our history leads me to think that anyone except people who enjoy it would become self-directed traders. Most likely outcome is "self-directed" trading through third-parties like wealthfront. So the automation will be concentrated. As in real life: if everyone is doing something, there's a possibility they are missing an opportunity. In 2006-2008 everyone was on my ass to "buy a house". I already owned a house from university, but I paid $150K for it in 2000. It is supposedly around $1mill right now. I decided to avoid and was able to buy some rental properties that I have since divested and moved into REITs. The return is not that different. What is everyone doing now? Becoming a landlord. I'm already out of it before they decided to do it. Margins are razor thin. https://www.forbes.com/sites/marcpr...-better-than-buying-real-estate/#3d4d78ffd6b7 So, automation will concentrate but that will leave opportunities that are not scalable for the entities doing the centralized automation.
machines v humans. if machine sends message telling trader to sell a stock BUT warren buffett had bought so the human would (correctly) not call broker to make trade. Does that mean trader is not a quant? no exactly he is the best sort of quant: mix of man and machine taking only the best parts of each. and that is the future of quants which people dont understnad because they say the machine is black box who does not know warren buffett.