How a Russian Math Genius Makes Millions Using AI to Trade Stock

Did you know that the majority of American stock market trading, valued at over $26 trillion, is actually done using computer algorithms, otherwise known as artificial intelligence (AI)?

In fact, the robo-advisors of today are just the commercial evolution of automated investor systems that have existed in the stock market sector since the 1980s.

For all intents and purposes human stock traders noisily congregating and trading on stock exchange floors are obsolete. It’s just machines vs. machines down there today.

So, why are human stock traders still employed at all?

It’s mainly to maintain a pop culture façade of human intervention in an otherwise sterile process. Investors, traders, and the public are still enamored with the opening and closing bell ceremonies, for example.

Yet, while the coming of the machines is upon us, it hasn’t fully taken hold.

Humans are still required for the oversight, maintenance and transitioning of the AI fintech that will eventually replace them.

In 2012, for instance, Knight Capital Group infamously lost $440 million in under an hour due to a trading software error at the NYSE. Human traders were required to manually halt trading on the floor.

Still, the future is almost here when it comes to automation.

One company, England’s XTX, is way ahead of the automation curve.

The company, valued at almost $700 million, has one human trader and is otherwise completely run by AI and fintech algorithms.

Kill all humans — eventually

XTX Markets Ltd. is the name of an AI-enabled stock market trading firm based in London and founded by Russian math genius Alex Gerko.

The name “XTX” is a reference to the custom trading algorithms and mathematical computing power of the firm’s technology.

According to XTX, the firm’s computer systems uses over 42 petabytes of data storage to enable its automated trading functions.

For the sake of reference, one byte is a unit of digital information. One petabyte equals a quadrillion bytes, or a number followed by 15 zeroes.

You could store over 250,000 digital movies on just one petabyte.

XTX transacts over $150 billion in market commerce across commodities, stocks, forex, fixed incomes, and will soon add U.S. Treasuries and stocks.

The firm rung up profits of $153 million in 2018, which was more than the double what it profited in 2017.

Still, we have a way to go before the reign of the robots is complete.

In terms of global market trading share, XTX recently fell from third to fourth place. JP Morgan Chase & Co. is number one.

Deutsche Bank is number two, leaping from eighth place.