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April 1, 2003

Computers Eliminate Trading Jobs

By John A. Byrne

Fancy new computer programs may be putting trading jobs at more risk than the bear market. That's because the growing use of algorithms and computer-driven trading is undermining the human intermediary, according to Scott Thornton, a buyside trading executive at the Los Angeles-based Trust Company of the West.

These technological advances are forcing the concentration of commissions dollars into a smaller group of desks. This change will reduce the number of traders employed within five years, Thornton predicted.

Over this period, the average buyside desk will handle more commission dollars as the changes work through the industry. He noted that the average trader - at firms with assets of more than $10 billion - each handled about $8 million last year in commissions, according to an industry survey.

"Buyside traders roles are going to change," Thornton told a panel at the annual conference of the Security Traders Association of Los Angeles. Traders who do not adapt will become "dinosaurs," he said. "Traders will have to become part of the investment decision process like the PM. Calls to the desk will have to be information-oriented."