JPMorgan Arms Coders With Trading Licenses as Quants Advance
U.S. bank has grown team of coders it started a few years ago
This is about convergence of the trader and quant’: JPM exec
JPMorgan Chase & Co.’s army of coders have gained their deepest foothold on the trading floor, winning licenses to deal in equities.
The biggest U.S. bank got regulatory approvals this month for two coders in London and New York to trade cash equities, with plans for a further eight licenses globally by year-end.
“This is about convergence of the trader and quant,” Jason Sippel, the bank’s head of global equities, said in an interview at its Canary Wharf offices. “It’s moving at warp speed and re-inventing what the trading floor looks like.”
Wall Street’s biggest banks have spent billions of dollars in an arms race to automate trading as competition squeezes revenue. JPMorgan plans to spend more than $11 billion on technology initiatives this year. Chief Executive Officer Jamie Dimon said this month keeping up with technology was “critical” in gaining market share.
One wrong move in the high-octane world of equity trading can mean the difference between a winning and losing quarter for the bank, but JPMorgan is placing great faith in its quant revolution.
JPMorgan grabs equity trading revenue helped by technology investments
Source: Company trading documents, Bloomberg Intelligence
*Figures show percentage points share change in equity trading revenue from 2015 through the first half of 2019
The lender set up a team several years ago called “Analytics, Automation & Optimization” with a mandate to drive the use of data across sectors like prime brokerage, derivatives and cash trading within its equities unit. Led by Hans Buehler, the unit has grown to about 180 from 86 three years ago, with those dedicated to cash equities nearly doubling to 36 this year. The newly licensed traders come from that group.
“We are hiring coders for equity sales who can tap into the reams of data we have to provide ideas,” said Sippel.
JPMorgan ranked first among global banks in equity derivatives trading in 2018 and third in cash equities, according to data from Coalition Development Ltd. In September, the bank said it had reached $500 billion in prime brokerage balances where it ranks second. In the third quarter, it posted a surprise 5% decline in equity-trading revenue, to $1.5 billion, which the bank blamed on derivatives.
Sippel said his unit has also started developing machine learning-based tools for the trading floor giving the example of “RoboTrader,” a new tool to automate pricing and hedging of vanilla equity options.
“Looking forward,” he says, “we will have much more automation.”