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How Big Data Is Monitoring Good and Bad Traders
September 7, 2016 News


The ability to monitor Wall Street traders is ready to move to another level. Global trading firms, like Bank of America Corp. (BAC) and JPMorgan Chase Co. (JPM), are working with tech companies to develop systems that will monitor emotions and activities of traders aimed at boosting performance and compliance, according to Bloomberg

The Signal Monitoring

Observing the benefits from analyzing customers, trading firms are extending the powers of harnessing big data and algorithmic monitoring for their own employees, the traders in particular.

Varying levels of blood pressure, heartbeat, stress, sweating, and emotional changes offer key insights into trader’s behavior. Success has been reported in such ongoing experiments at academic institutes like MIT and Kellogg School of Management, as well as at startups like Humanyze and Behavox.

The Traders In The Limelight

While major functions of a financial firm, like M&A advisory or securitization, are team-based and time-bound, trading is individual-centric and impulsive decision-based activity. Often, emotions supersede the logical thinking of the individual traders, and leads to massive losses in trading.

Use of big data-based algorithmic systems, which are fed with real-time inputs received from sensors monitoring the traders’ biological activities, has the potential to dramatically change how traders are managed.

For instance, real-time inputs received from sensors attached to the traders’ wrists to track their physiology, stress patterns, perspiration and pulse rates can be vital. The complex system based on such inputs combined with behavioral history of the trader can provide warnings to avoid getting into a trade if the system senses that trader’s present state may not lead to a logical trading decision.

Risk managers will get improved preventive tools for monitoring trading desks before the damage is done. Additionally, the system can be used to assess various facets of potential hires, like risk-taking and decision-making abilities in a stressful market. Over a period of time, companies will be able to build databases of case studies and scenario analysis for better demarcation between good and bad traders.

The Concerns

However, the system comes with its own set of challenges. Similar to the concerns raised for the widespread tracking of customer information, the tracking of individual traders’ biologics may constitute considerable intrusion of privacy. Traders should brace themselves for demands to raise performance amid increased expectations. (For more, see Top 10 Rules For Successful Trading.)


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