The digitisation and automation taking place in finance is, without exaggeration, revolutionary. It will allow markets to increase in size and efficiency far beyond what is possible today.
This progress has been slow but steady. The first fully digitally documented syndicated bond was only issued last year, and the first multi-tranche deal with multiple bookrunners in March. Since then, the European Investment Bank pioneered the use of a digital euro while issuing a bond on the Ethereum blockchain.
Meanwhile, start-ups are competing to create platforms that eliminate inefficiencies in the secondary market. One such company, LedgerEdge, aims to launch a corporate bond trading platform that uses distributed ledger technology to remove the guesswork — some traders might say “craft” — out of assessing the liquidity of particular positions. And the tools used by syndicate and sales desks are no doubt being transformed by canny fintech developers backed by venture capital.
But if all of this work — generating ISINs, gathering market intelligence, selling bonds — becomes automated, will the bankers deprived of those tasks face an existential crisis, and possibly the boot?
Tim Cook, LedgerEdge’s head of business development, says no. “It won’t reduce the need for traders,” he said of his company’s corporate bond trading platform. “But it will allow traders to do more with less.”
Freedom thanks to tech
Some perspective might be gained from looking at how technology evolved during the 20th century.
The electronic calculator was invented the 1960s. Then in 1971, the first pocket sized calculators appeared, drastically reducing time needed to do sums.
Eight years later, Dan Bricklin and Bob Frankston created VisiCalc, the first electronic spreadsheet application. This enabled someone with a computer to see how changing one number in a formula could affect an entire financial model. Microsoft launched its own spreadsheet, Excel, in 1985.
Then came the internet, along with email and instant messaging, as the 1990s began. Open outcry trading was already dwindling, but now traders could conceivably do business without picking up the phone.
Did those developments, each of which was transformative for finance and the capital markets, result in the redundancy of the banker? Quite the opposite.
Even though those technologies eliminated many labour intensive tasks, bankers still have as much work to do as they did before. If anything, they’re overstretched, if the complaints of overworked junior analysts within Goldman Sachs’ US investment banking division are anything to go by.
Any increases in productivity has been met by a corresponding or disproportionate increase in the amount of activity taking place, resulting in bankers having more to do now than ever before, but where it counts — dealing with clients. (Although some may argue there’s also been an increase in the time they spend dealing with red tape.)
Bankers should hope that advances in technology make their lives easier by removing more menial drudgery from their day, freeing their time up for tasks that require a human touch, such as generating new ideas, negotiating a deal that is beyond a robot’s capabilities, or strengthening client relationships.
The machines could even free up enough time for junior bankers to get a full night’s sleep. But don’t bet on it.
