Is the Middle East ready for robo-traders?

Updated 31 October 2018

Is the Middle East ready for robo-traders?

Antonio Simeone, co-founder of Euklid, which manages savings and investments through thousands of algorithms, tells Arab News how his company is developing code that aims to understand not only the vagaries of the market but also the psychology of the trader.
Can you describe the likely application of your idea? That is to say, are you offering the technology to existing fund managers or other investment companies, or do you plan to perform that role yourself — deploying capital for clients in investments picked by algorithms?
We have already established a fund in Luxembourg and recently started raising funds from both qualified and institutional investors. The AUM (assets under management) in our fund are then invested utilizing our artificial intelligence (AI). Our AI studies the psychology of traders and recognizes the fingerprints that they leave behind, besides also being able to identify patterns and micro-patterns which can’t be perceived by the human eye. Due to our entrepreneurial spirit, we chose to set up our own structure and manage money directly instead of licensing our technology.
Part of a fund manager’s job is to predict investments that will perform well in the future, not just collate those which have done well in the past. While algorithms can help with the latter, are they as effective in looking ahead?
By using our algorithms, we aim to understand the traders’ psychology regarding a specific stock.
Our experience has shown us that each trader leaves some kind of traces and that these signs are written in the historical series.
We aren’t managers but scientists. What we do is completely guided by artificial intelligence, thus removing human discretion in the investment process.
Particularly, our AI is capable of recognizing stock fingerprints that traders leave behind and, by analyzing these and a number of other variables, predicting the changes in value of each stock in our portfolio.
We have developed around 45 algorithms that have been customized for every single asset that we trade.
Our portfolio is made of 184 equities among the most liquid on the markets, 70 percent being US equities. The algorithms are based on biocomputing, a science linked to maths, physics and biology. In order to keep the learning process efficient, an optimization process is ensured by swarm intelligence, neural networks and genetic algorithms.
We could say that we create the basic foundation and then it is up to AI to create other structures autonomously and independently.
Let me simplify this concept for you: It is as if we had thousands of traders at our disposal, who are, however, virtual. The strongest or the best are those that stay alive, and those who are not simply die.
Do you have targets in terms of projected assets under management?
Our fund launched in mid-August and therefore we don’t have a vast AUM at the moment. However, many qualified and institutional investors who have been following us for a long time are really interested in our activity and we have received many soft and hard commitments.
Our objective is … to reach the maximum amount (around $13 billion) manageable with our algorithms in three to five years. This limit is due to the fact that the algorithms trade exclusively blue chips and highly liquid stocks. However, the AI is created to
understand and predict the market’s psychology, and it would start to have issues when the AI itself starts influencing markets.
How far away are we from the point at which algorithms replace fund managers in the same way that other functions in different sectors have been made redundant by technology?
This is the reason why we do not have any management fees. We are a team made up of just a few people but our technology acts like thousands of “virtual” traders who work 24/7 for us. They are able to observe an asset from many different points of view. We are the first fund to use both AI and blockchain. But, honestly, the financial industry is rapidly evolving and getting more and more software-based; Thus this scenario is not that far from the current practice as we may wrongly think.
How can algorithms make sense of the extremely volatile and illiquid markets such as in the Arabian Gulf, where there is little raw data to process?
I happen to think about the cryptocurrency world. When we first started our algotrading activity on bitcoin, we had little and unreliable data. Only three years of historical series. Despite this, our algorithms were able to understand the trades’ psychology in a very accurate manner. But that was a very volatile and predictable scenario, and I don’t think we could achieve similar results with other assets.
The traders’ psychology was redundant and very simple; even the alleged manipulations were easily predictable. But, right after the bubble burst — or maybe right after the features were issued — the market sentiment really changed. Algorithms keep learning but this world seems less attractive and it is impossible for our algorithms to operate with more than $50 million because of the limited market capitalization.
As far as the Arab market is concerned, we are still studying it but we have many problems in searching and computing data.

Virtual oil summit planned amid ongoing market volatility

Updated 04 April 2020

Virtual oil summit planned amid ongoing market volatility

  • Meeting follows call from Saudi Arabia for urgent meeting and telephone diplomacy between Kingdom, Russia and the US

DUBAI: Leaders of the global oil industry are planning a crucial “virtual” summit next Monday amid ongoing volatility in crude prices and falling energy demand.

The meeting follows a call from Saudi Arabia on Thursday for an urgent meeting and a round of telephone diplomacy last week involving the Kingdom, Russia and the US, as well as meetings between policymakers and oil industry executives.

The summit is expected to involve the 11 members of OPEC as well as other oil producers from the OPEC+ group.

But exactly which countries will take part in the summit was still up in the air last night. 

Russian President Vladimir Putin was holding talks with executives from the country’s major oil companies before deciding whether or not to participate. The Russian leader has previously indicated his willingness to get involved in talks to help resolve the crisis in the global energy industry, but Russia was also the country that refused to take part in a round of deeper production cuts proposed by Saudi Arabia in Vienna last month, sparking the current price war.

In response to that refusal, the Kingdom increased production and lowered its selling prices. On Sunday, Saudi Aramco, which has pushed output to a record 12.3 million barrels per day, is scheduled to announce its “official selling prices” (OSP) for the month of May, expected to show a continuation of the deep levels of discount to attract customers, especially in Asia, in the battle for global market share. 

Brent crude continued its rollercoaster ride on global markets on Friday, dipping nearly 5 percent before hitting a high of 17.5 percent up at $34.91, before paring gains to about $33.

The options for the producers at Monday’s meeting are limited, in the face of an unprecedented drop in global oil demand. By some estimates, more than 20 million barrels of daily demand was lost last month, the biggest ever contraction in oil history.

Saudi Arabia and Russia, which between them produce around 23 million barrels per day, are unlikely to be willing to take all the pain of bigger cuts without an offer from the Americans.

US President Donald Trump tweeted on Thursday that he expected between 10 million and 15 million barrels of oil to be taken out of supply, but he did not specify where this would come from. Meetings were expected to take place at the White House with oil industry executives and policymakers on Friday.

Daniel Yergin, Pulitzer Prize-winning oil expert, said: “The ‘when,’ ‘how’ and ‘who’ of the potential deal remain unclear. And the larger the universe of players the more difficult it will be to implement an agreement.”

OPEC+ consists of the 11 OPEC members, led by Saudi Arabia, plus 10 non-OPEC producers, of which Russia is by far the biggest.

The involvement of the US in the Monday meeting is also unclear. America is not an OPEC member, but US oil executives have attended OPEC deliberations in the past. American participation in any new rounds of output cuts will be constrained by the fact that the US oil industry is made up of private companies — as opposed to state-directed corporations — whose interests diverge.

While big players including Exxon Mobil and Chevron might be willing to take some advice from the White House, the smaller companies in the Texas shale fields are more focused on the immediate financial repercussions of the past month’s volatility.