When a Casino only has electronic slots.How will the future of capital markets look? Try to imagine the classic gaming house, live people clearing chips on the floor and then another side which has electronic slots that takes pennies, reaching to catch any level of gambler because the cost is so low to operate due the efficiency in technology. Today’s stock markets are clearing out the roulette, craps, poker, blackjack tables and parking machines in their place. Eventually, the place is only filled with chronic gamblers who are pushing buttons for pennies. This evolutionary process is already underway.
- Markets begin to complain about fair value no longer holding/old metrics don’t work
- Machines continue to push around the market to human programmed algo’s
- Traditional market players get fed up, volumes slow down
- Volatility decreases with no real money pushing it around
- Machines sit around to collect pennies
- ETF’s take away massive mutual fund/private wealth share
- Traditional client pays for only technology
- Research and company access value drops
- Massive layoffs on sell side and traditional buyside
- Large hiring in IT development, financial network security and risk management
- Once in awhile, the machines break and the SEC spanks (flash crash)
- Investment banks are just that - IB and lending.
- Investment banks IT employee ratio soars to >75%, Banks start to become tech plays.
- Leverage leaves the system, markets and balance sheets deflate.
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