Will AI Spell the End for Equity Traders but Spare the Sales Traders, the Charming Ones Anyway?
Shabnam Sorkhi | Equity Trader | 2023
As AI threatens to turn equity traders into museum exhibits, their smooth-talking cousins, the sales traders, seem to dance around the digital bonfire. So, while AI crunches market data for breakfast, the real question is: Can it master the art of the handshake or out-charm a sales trader at happy hour?
Author - Shabnam Sorkhi
Note the date on this article. I am writing it at a time when, in my town, hardly anyone has heard of ChatGPT, let alone used it. That will change quickly, of course. Today’s novelty is tomorrow’s inevitability.
The way we invest and trade is changing rapidly. Today, investors have powerful online tools at their fingertips and are becoming more financially astute. Breaking away from conventional methods, they are taking control of their investments through modern trading platforms. As this transformation unfolds, let's hypothesize that the traditional landscape of brokers and their sales relationships endures. If this is the case, we must ponder how the inevitable march of AI will redefine their roles and the very fabric of trading as we know it.
My first hands-on experience with AI began during my graduate degree in Civil Engineering in 2009. Back then, the concept was perceived quite differently from what many understand it to be today. We regarded "Artificial Intelligence" as a complex web of codes with the ambitious goal of replicating human thought processes as closely as hardware and software would allow. Yet, despite its grand title of "intelligence," we recognized that it was not truly intelligent in its own right. It was the product of our intelligence, a coded mimicry of cognitive functions that did not possess the ability to make independent decisions and was only as smart as its creator allowed it to be. Let's call this traditional AI "Vintage AI." For a tangible metric to track the evolution of Vintage AI, just consider the progress made in robotics. Although there have been impressive strides in this field, the ongoing quest for fully autonomous, decision-capable robots indicates that there is substantial ground yet to be covered. Or, look no further than the use of trading algorithms, representing the current peak of Vintage AI in the trading world.
The AI that is now a staple on many LinkedIn profiles is "generative AI," or as I like to call it, "Ladder AI," because shouting this buzzword in the room is the new corporate ladder workout. Ladder AI markedly diverges from its precursor, Vintage AI. Take, for instance, the well-known ChatGPT from OpenAI. By the beginning of 2023, ChatGPT had gained significant attention, not all of which was informed. Many seemed to either underplay or exaggerate its capabilities. Let me tell you what it really is. It is an application built on a natural language processing (NLP) model that employs a neural network to identify patterns within vast sets of data. This is why ChatGPT has a "knowledge cutoff date," recently extended from September 2021 to April 2023. ChatGPT operates on a closed dataset, without updating or learning from new data after its knowledge cutoff date, and leverages deep learning – an advanced subset of machine learning involving neural networks with multiple layers – to understand context and generate responses. In deep learning, these layers, analogous to neurons in the human brain, process input data in a hierarchical fashion. Based on its training, the AI measures how likely different sequences of words and phrases are. After assessing these probabilities, it selects and combines them in ways that form responses most in tune with the given query. So, don't fight Ladder AI, and don't make a deity out of it, just enjoy its algorithmic acrobatics.
As simple and ordinary as I made it sound, Ladder AI is a transformative force within the realm of Vintage AI. Serving as a user-friendly and powerful catalyst, it accelerates research and development across numerous sectors, enabling scientists and engineers to tackle complex artificial intelligence challenges. In my view, Ladder AI is comparable to calculators: tools that do not erode our intelligence but enhance our problem-solving abilities. Like calculators, which handle basic arithmetic to free up mental space for higher reasoning, Ladder AI automates mundane tasks, empowering us to focus on more creative and strategic activities within Vintage AI.
As we enter a more AI-integrated world, it is important to dissect and understand the contrasting impacts of AI on different roles within the trading landscape, especially those on the sell-side, gritty warriors of the stock market. Here sit the methodical, data-driven traders alongside the intuitive, relationship-focused sales traders. Although they share the common ground of the trading floor, the introduction of AI will likely carve distinct paths for each role's evolution.
It is fair to argue that the true value of a high-touch trader lies in their mastery of the mosaic theory, tile by tile, assembled through rigorous personal market experiences. This is precisely what AI can replicate and enhance. The role of AI in complex trading, especially in executing sizable block trades, would involve using its unparalleled pattern recognition abilities and extensive memory, surpassing the limitations of human recollection and data crunching capabilities. AI-driven block trading systems would tirelessly compile, save, and sift through a wealth of data, which encompasses historical trades and the intricate trends within individual client portfolios under numerous market and liquidity scenarios. Ultimately, the human brain's cognitive capacity to process the flood of market data is limited, while AI can manage and analyze this constant stream of information with ease.
This form of AI has the potential to assist traders in anticipating client preferences, not by operating autonomously but by enhancing their ability to meet the needs of their clients. For instance, the system might suggest that Liz from Company XYZ is 60% more likely to buy shares of ABC after their price has steadily dropped by 2% over one month. The likelihood of a purchase could further increase if influential figures in the market, such as John, discuss ABC on social media platforms. Insights from AI would contribute to more informed client discussions and personalized trade execution. What will happen when the clients choose to trade differently, also due to AI? This question hints at a brewing storm, a potential overhaul. A revolution, if you will. When that day arrives, the familiar landscapes of the market, as we know them, will never look the same.
Now, let's turn our attention to the sales trader: the author of those quintessential morning briefs in the trading world. As a sales trader, if you are reading this, you are well aware of the value placed on your morning commentary. Should uniqueness fail to characterize your notes, their necessity may eventually come into question. Currently, sales traders maintain an advantage, thanks in part to copyright laws and institutional security policies. However, as AI continues to advance, the long-term viability of this advantage and the demand for manually curated morning notes could be put to the test. Ladder AI would be particularly adept from this perspective, capable of processing and disseminating news more quickly and with fewer errors.
Before we give too much credit to the silicon and chips brigade for their advancements, let's take a moment to consider a day in the life of a charismatic sales trader named Alex. It is early morning, and Alex is already up, but rather than diving into spreadsheets, they are perfecting their espresso game. Their morning note to clients isn't just dry stats; it's peppered with personal touches, like their famous Tuesday pancake tip. A day in Alex's life is less about number-crunching and more about catching up with clients on last night's game or little Timmy's latest goal. Lunch is more than just eating; it's about sealing deals with a side of smiles and shared stories at a downtown spot. The afternoon is filled with calls that might start with stock picks but end up in shared laughs about a quirky relative's dance moves. When the market closes, Alex isn't stuck behind screens; they are out on the golf course or enjoying dinner at an upscale restaurant where bonds are formed, and deals are done.
Indeed, therein lies the magic of their profession; sales traders offer critical advantages in building trust and ensuring confidentiality, keys to client relationships that AI has not mastered. It would be naïve to assume that deals simply happen because they are objectively good or that a client is convinced solely by the deal’s merits. Rather, transactions are often a result of trust and connections built on shared experiences, elements that sophisticated AI cannot duplicate.
AI may be excellent at identifying opportunities, but sales traders bring negotiation skills to the table. They persuade and argue for or against certain trades, which gets deals over the line. This involves a degree of creativity and spontaneous strategy that is responsive to the flow of a conversation and the reaction of the client, areas where AI is not yet fully competent. Sales traders tailor their advice, adjust the way they communicate, and even choose the right time to interact in a way that aligns with each client's individual personality and life circumstances, showing a level of personal attention that creates stronger bonds and trust. In contrast, AI struggles to perform nuanced interpretations of human behavior, often described as “reading between the lines.” During conversations and negotiations, it is this skill that allows sales traders to craft real-time strategies that address their clients' spoken, but more importantly, unspoken needs.
In times of market volatility, regulatory changes, or complex corporate actions, the value of a sales trader's expertise is magnified. They play an essential role in offering clients reassurance grounded in a thorough understanding of ethical practices, strict regulations, and the intricacies of corporate events, services that the data-centric approach of AI cannot fully replicate. During periods of uncertainty, it is the human element – the empathetic support and seasoned counsel of a sales trader – that provides clients with dependable and personalized guidance. This underscores the indispensable role of human insight in an industry that is increasingly influenced by technological innovations.
Now, for a moment of levity, take a breath, sales traders, for your role is not yet on the endangered list. Your position continues to stand strong against the waves of innovation. Curiously, it seems that you are the ones putting up a stiff resistance to the silicon tide, more so than your trader counterparts. The secret to survival may not lie in the intricacies of your sales trading intellect, as formidable as it may be, but rather in the irreplaceable human charm. The idea that AIcould replace these personal aspects of client engagement seems as improbable as robots leading a wine tasting, which seems unlikely in our lifetime. Yet, don't rest too comfortably; it's time for a little introspection.
Next, on your to-do list: a quick mirror check. Ask yourself: Is your face the kind that puts people at ease and makes them want to stick around? Are you the person everyone is glad to see in a room? It might be time to consider a life coach or a visit to a plastic surgeon if you are feeling brave. In a world where AI could be your new coworker, remember that a genuine smile and solid people skills are your secret weapons.
Disclaimer: © 2025 Quant Mama Bees. For general information only. Not financial advice. Read our Disclaimer.