In an effort to cut costs and make internal processes more interesting, U.S. investment banks are busy trying to automate the process of doing deals.
First they came for the equities traders and the FX traders. Then they came for the CDS index traders. Now, it seems, the computers are changing the jobs of people working in M&A and capital markets.
In an effort to cut costs make junior jobs more interesting, U.S. investment banks are busy trying to automate the process of doing deals.
J.P. Morgan has something called the “Emerging Opportunities Engine”, which helps predict which clients might want to do a deal soon. Goldman Sachs CFO Marty Chavez has said he wants to automate the initial public offering (IPO) process and Goldman is already busy hiring London-based Java developers for the purpose of, “automating the wide-ranging workflows and processes that form the execution of an Investment Banking project”.
The automation of ‘workflows’ within big banks isn’t the only change to analysts and associates in investment banking divisions, though. On the sidelines are also the “digital investment banks” that are changing how the big firms operate.
One such is Overbond, a Toronto-based start-up run by a Vuk Magdelinic, a former salesman at CIBC, which is making primary bond issuance digital, transparent and secure by connecting issuers with dealers and investors directly.
“We’re building a cognitive computing algorithm that can predict who is going to be an issuer and is likely to come to market in the short term,” says Magdelinic. “We also have an algorithmic pricing tool which prices securities and we can algorithmically match investor portfolios with industries and issuance opportunities.”
There aren’t many IBD professionals at Overbond. The company employs 30 people, but most of them are “engineers” and most are based in Toronto, which is known for its artificial intelligence community. As Overbond expands this year, Magdelinic says sales and relationship managers will be added globally. He is adamant that AI tools will supplement rather than supplant existing banking jobs: “Bankers in the 1970s didn’t have laptops or cellphones – technology is simply evolving,” he says. “The skillset and the added value of bankers are here to stay, this is just about making people more efficient.”