by Michael McDonald
The classic Wall Street trader is dead. For decades, or even centuries, the professional investment markets were characterized by smart individuals buying and selling stocks, bonds, currencies, and commodities based on intuition, savvy valuation skills, and luck. Those days are gone. Trading on Wall Street today increasingly involves computers, algorithmic models, and big data. That is true not just in stocks, but across markets.
Many investors are aware that the old NYSE floor trading is a relic of a bygone era, but even at major banks, the people who work there are rarely traders themselves. Bloomberg recently profiled a story of a top currency analyst explaining that as recently as 2007, Goldman Sachs and other major firms traded in markets by having a skilled analyst shout trading directions whenever market moving information like Weekly Jobless Claims were announced. Those days are gone, and that top analyst Bloomberg profiled is today focused on using Big Data to help clients develop better currency trading algorithms.
This changing market structure has dramatic implications for everyone on Wall Street from traders and individual investors to those supporting Wall Street like accountants and attorneys.