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Algorithmic Trading Rapidly Replacing Need For Humans
DMandPenfold writes "Algorithmic trading, also known as high frequency trading (HFT), is rapidly replacing human decision making, according to a UK government panel which warned that the right regulations need to be introduced to protect stock markets. Around one third of share trading in the UK is conducted by computers fulfilling commands based on complex algorithms, said the Foresight panel in a working paper published yesterday. Nevertheless, this proportion is significantly lower than in the U.S., where three-quarters of equity dealing is computer generated. The Foresight panel, led by Dame Clara Furse, the former chief executive of the London Stock Exchange, argued that there are both benefits and severe risks to algorithmic trading. There was 'no direct evidence' that the computer trading in itself increased volatility, it said, but in specific circumstances it was possible for a series of events with 'undesired interactions and outcomes' to occur and cause massive damage."
It's not replacing humans, it just improves profit making for those who want to trade. It's only one part of stock exchanges. That's fine too - if you can come up with an advanced algorithm that nets you profit, sure use it. Everyone on slashdot would.
And through off the computers.
http://www.smbc-comics.com/index.php?db=comics&id=2362#comic
It's all just busy work.
As someone who worked at Goldman Sachs, I can completely attest to this; a lot of the software was automated, but what the trading group was always asking for was basically an autopilot system; they wanted to sit back and just let the money roll in. One of them, I remember it distinctly, said that he'd love it if he didn't have to watch all the various windows all the time because he "had better things to do".
This was the same group of guys who, one of them told me "if I could kill you, not get caught, and make money because if it...I wouldn't think twice".
Fun times...
The computer that "takes over the world" wont come from a mad scientist's workshop or the military-industrial complex. Instead it will emerge out of Wall Street. There are few stronger motives for Artificial Intelligence than to make lots of money.
HFT does not help the market in any way. It does not promote the investing of capital. Going into and out of a company in less than a second is ridiculous. Steps need to be taken to stop HFT in its tracks before the whole market is ruined.
This will fix HFT:
1. random delay in all trades.. stick a 100ms to 1000ms delay before all trades are posted on the market
2. tax all trades by a miniscule percentage.. give straight to government debt
3. enact a rule that all trades stand.. erroneous trades made by a computer algorithm will never get rolled back
--- We need more Ron Paul!
So what happens when the algorithms start demanding a billion dollar bonus before they'll turn up to work?
Algorithmic trading, also known as high frequency trading (HFT), is rapidly replacing human decision making, according to a UK government panel which warned that the right regulations need to be introduced to protect stock markets
Like making it illegal for humans to beat the algorithms?
Donate free food here
its stealing money from peoples wallets. with algorithmic trading, it is no longer an orderly market.
I've never been convinced that HFT is anything but a scam to make institutional investors more money without doing more research or making more socially responsible investment decisions.
The company worth truly investing in, in the sense that you hope it survives and hope it continues to grow as opposed to only making you lots of money, is the one that will treat the environment, their employees, their supply chain, and their customers with respect while paying investors and owners a respectable return.
HFT algorithms don't give a fuck about any of that, exactly like the stereotypical Wall Street broker doesn't care about any of that; in fact HFT algorithms were written when brokers realized they could make more money in corrupting and managing young mathematicians than in doing their own jobs. HFT just further emphasizes empty, short-term speculation without regard to the product sold, the behavior of the company, or the future potential of the company. It enables the irresponsible greed of people who just want to make a dollar in the next day to become the irresponsible greed of people who just want to make a dollar in the next 0.0000000001 seconds.
uses an algorithm to trade: I take the numerological sum of the letters in the stock, add the numerological value of the date and time, and check in a table (generated at random) to see if they are "compatible".
It would be exactly as valid as the "algorithms" used by traders. It has no basis in fact, and indeed is directly contradicted by the very theory they base their lives on: Hayek's freemarketism. In the end, almost all of these "algorithms" have been shown to be as valid as chance.
...and the fact that actually traders, who notoriously consider themselves above the computers/IT, will be replaced by algorithms makes the current (and future) situation very very ironic. :-)
I would say LOL to them but unfortunately now they wouldn't understand. In possibly 4/5 years they will understand!
Or, in other words, "To err is human; to really foul things up requires a computer"
They can trade all they want, I don't really care.
I'll buy when it's undervalued according to me, and sell when it's overvalued.
If they screw up and sell it for much less or offer to pay much more than it's worth I win not them.
The real question is: what was the original purpose of the stock market? What problem is it trying to solve? I guarantee that letting people make money by micro-trading of stocks based on nothing but trends and volatility is not it. It's time to rethink the whole system, but wait, there's a trillion dollars and the stability of national economies at stake. We're stuck with it, short of some kind of (permanent) revolution.
Time to go read more Trotsky.
The only thing worse than a Democrat is a Republican.
The stock markets are no longer about investing in companies you believe in or who have a solid track record. It's just computerized gambling.
I do not fail; I succeed at finding out what does not work.
Those Wall Street millionaires are barely making ends mink!! Meet; I meant meet.
Algo trading is not HFT. Whoever wrote the article is an idiot. Algo trading is any kind of automated trading. HFT is high frequency trading, a very specific form of algo trading, which is probably not that profitable as people make it out to be. http://blogs.wsj.com/deals/2010/09/24/high-frequency-trading-not-as-profitable-as-you-think/
so we are still trading, the computer is just doing the grunt work.
To previous poster, the stock market is fundamentally designed to put people with cash on hand in touch with entrepreneurs with a need for investment capital. This is NOT what's happening here.
We had a client who bought one of our software libraries about 7-8 years ago and needed our help to build a trading app that employs these silly algorithms. These flash trading algorithms are exploiting market fluctuations that have little to do with fundamentals and sound investments. First you find a statistician to find stable market blips. If you've got instant access to the markets and wads of cash, you can exploit the fact that (hypothetical examples) there's a 2 hour dip in tech stocks when most IT staffs are in their Monday morning meetings. You can exploit the fact that private schools have orientation every 3rd Friday in August, so the NYC big wigs are all taking their kids to class and markets dip. Or that, on the Friday before the Super Bowl, Frito Lays sales spike for 4 hours because people are stocking up on chips for the game.
It's electronic money and I shudder to think what elements of our economy are being squeezed to generate it. The only thing that'll change this culture is to regulate flash trading out of existence.
I swear to God...I swear to God! That is NOT how you treat your human!
And gambling is wrong?
There was 'no direct evidence' that the computer trading in itself increased volatility, it said, but in specific circumstances it was possible for a series of events with 'undesired interactions and outcomes' to occur and cause massive damage.
Apparently they are unaware of the 1000 point drop in the Dow last year that appears to have been caused by HFT.
Time to offend someone
If eventually all trading is initiated and executed by computer programming logic, wouldn't that just result in a stagnant market? People make irrational decisions that can be exploited, Computers made logical decisions. Eventually a pattern could be deduced and countered. It reminds me of the old Dr. Who episode where two alien machine races are at war but have reached a complete stalemate since they can anticipate each others moves.
No I don't see gambling as wrong, but lets tax it like gambling instead of capital gains. That would put an end to it real fast.
Time to offend someone
companies release quarterly reports. stocks trades should be quarterly. trades made by any other measure are speculation or insider.
That's what happens when you flip the stock market over and attack its weak spot!
Scientists point out problems, engineers fix them
altslashdot.org: The future of slashdot.
Yes and no. For those on Wall Street it is like gambling (specifically like playing black jack and knowing what the dealers down card is and what the next 10 cards in the shoe are) but for regular people who have investments for retirement and other long term goals not so much.
Time to offend someone
Benefits: More money transferred to the very wealthiest individuals as traders who can't afford HFT servers (physically as close to the trading floor as possible - at these speeds, light is too damn slow) are at a severe disadvantage.
Severe risks: Potential for total economic collapse to take place in the blink of an eye.
I punch those numbers into my calculator and it makes a frownie face.
"When information is power, privacy is freedom" - Jah-Wren Ryel
And why should we end something that we don't think is wrong?
Also, why does gambling still exist? Surely something is not right.
It works something like this:
1) Someone invests money, holding the stock for many years.
2) They decide to sell it
3) N high frequency traders buy it from them, on average making a bit of money.
4) Eventually another long term investor buys it. On average, for what the first guy sold it for plus what the HFT people made.
Thus, the money they skimmed off should have either gone to the first long term investor or kept by the second. They are both doing something useful. The HFT guys are not.
-WolvesOfTheNight
There was 'no direct evidence' that the computer trading in itself increased volatility, it said, but in specific circumstances it was possible for a series of events with 'undesired interactions and outcomes' to occur and cause massive damage.
Well that's the risk isn't it? Or are we going to start covering this with some kind of gambling insurance?
It's shocking how little those people seem to comprehend the concept of a computer program.
"Oooh, teh computerz is teh evilxorz!!!111one!"
"Oooh, teh computerz is doin’ it!111one!"
Aaaaand who programmed those computers??
Humans! That’s who!
Algorithms are nothing else than the result of a human going: "Hey, I noticed a repeating pattern in my work! I better write down how to do it, so I don't have to re-invent it the next time!" ... Wait, I noticed a pattern in building those machines too! HEUREKA! I'll make an universal machine that can execute all patterns!"
And on computers they additionally are "I'll make a machine that can execute my written-down patterns!
It's the logical next step from paying a factory worker. And it reduces errors, as computers don't tend to forget the little details of a task over time.
So stop acting like "computers are doing it". As if it were not still humans in control who have strictly decided every single decision they could think of.
If anything, it's the "... could think of... in advance." part, that can become a problem.
But if one realizes, that the brain itself is nothing but a prediction machine, and everything we act on is >90% experience-based (for efficiency) (where experience includes logical conclusions made some time ago), that point becomes a lot less relevant.
When someone wants to buy say, 1000 Apple shares, HFT detects the order and struggles to make the buyer pay the maximum limit for the operation. At the end, the buyer finds that he made his purchase at the price he requested, so he can't complain about the cents/dollars he lost while executing the purchase order due to HFT interference.
This, multiplied by millions of operations each day, makes a big ammount of money that ends in sharks pockets, and not in investors accounts. This is stealing. A clever way of stealing, though.
Please introduce a random delay (from 1 second to 30 seconds may be enought) to all the orders. Investors wont notice the delay, and HFT would be history. Imposing a limit on the operations per day from one individual on each company would help also. Why on God would anyone wanting to invest in a company to buy and sell more than 20 times per day in the same company? The stock market should be about funding companies that do productive work. Derivates and all the second order products should only be allowed up to the point they help to the main purpose of funding companies.
In Soviet Wall Street, high frequency slot machine plays you!
This is one reason we should go to a gross receipts tax. If you had to pay 3% on every dollar you received from any source, it would make HFT impossible, along with most day-trading. Someone who actually invests in a company, and receives dividends (taxed at 3%) then sells 10 years or more later to either choose a new investment strategy or to become liquid, would only pay 3% of the receipts, and probably far, far less than normal taxes today.
Your broker chain - who you presume is actively working to get you profits - is getting 4% of the gross for "investing" in that mutual fund, rather than taking a percentage of the profits. Ever wonder why there seems to be more profit to be had on Wall Street than in Washington DC these days? Yeah, me neither.
Is it just my observation, or are there way too many stupid people in the world?
Yeah, for long term investors it's like being the house when the guy sitting at the table playing black jack and knows what the dealers down card is and what the next 10 cards in the shoe are. Usually, the house takes those guys out back and breaks their knees, but it this case, the guy at the table happens to already own the knee-breaking-guys.
Is it just my observation, or are there way too many stupid people in the world?
The fundamental failure in this case is the failure of approaching the market from investor perspective, and this fundamental failure is incentivized by free money, just like the insane CEO pays and non-existing dividend yields.
The very reason WHY it is at all possible to trade stocks at these insane speeds is this: people do not see their purchases as investment, they are not looking for or getting dividend yields.
People who are purchasing stocks are not looking for an investment opportunity in the underlying business, they are looking for a way to flip the stock quickly and to make the money.
Automation of this process is INEVITABLE as all things that are repeatable and can be automated with some investment capital in order to make the process more efficient will be done. Investments will be made. Automation will remove the slow element in the equation - the human trader.
The fact that the stock market is now not providing investment opportunities, but is instead used to gamble in the hopes that the stock will move in the right direction (up or down), is based on the available amount of free (interest free) money that is provided into the financial system by the Federal reserve bank.
At this point that Bernanke promised to keep interest rates at 0%, expect more and more automation to happen in HFT, it is an inevitable result of this moral hazard.
The fact that the money is being debased quickly, and the so called "economists" - the modern era witch doctors of the kings are promoting this debasement and the fact that the majority of people are buying into this idea, that money needs to be destroyed and stocks are there for gambling and not for investment (not for business participation and not for dividends to be paid), this fact will also provide more space for this further perverse action.
The free money create incentives to gamble, destroy incentives to save, and people (here, on /.) are celebrating this very fact, while amusingly at the same time being perplexed and angered by the wider and wider spread of HFT.
In order to fix this problem, what should be done is the Federal reserve bank must be prevented from further debasement of currency. The market must be allowed to set the standards on what money is. The interest rates must be set by market pressures, not by government decree. Government must stop issuing debt that it cannot repay and it must liquidate the debt that exists.
Only this will allow the currency to become valuable enough to be saved, it will create competition pressure between sovereign debt and the corporate bonds, this will force the companies to pay an actual INTEREST on the bonds - DIVIDENDS, which will in turn lower the pay that the CEOs and other management gets out of profits and simultaneously this will allow the markets to become investment vehicles again, instead of being giant casinos.
---
Obviously, this again, will not be a popular or an understood opinion here, but it must be said.
You can't handle the truth.
You're exactly right. How much research goes into the fundamentals of an investment when the duration of the investment is measured in microseconds, or minutes, or even a day? This is all "technical" trading based on price trends of the charts. It has nothing to do with investing in a company.
My opinion is that the purest and simplest way to create stability and rationality in the markets is to require that all stock purchases must be held for at least one month. That'll make people do some real homework before plunking down their bets on a ticker symbol, and it will return the market to a place for actual Investing in real companies, not just trading/gambling.
That one change will fix everything.
washing boards.
Dear Slashdot Editors:
Get a life and report news, not CRAP.
Yours In Moscow,
K. Trout
The algorithms are just extensions of human judgement. Certain patterns in stock signal that price move is occurring or is about to occur.
...Or it could be chaotic noise generated by the interactions of multiple HFT programs. HFT has a benefit that is added to the market, that is it makes trading in a market place with them a completely liquid proposition, in that if you are willing to buy or sell at the right price, you have a traders whenever you need them. They also cause market fluctuations on a second by second basis, making it pretty much impossible for a human to 'beat the system' over very short time periods barring any logic exploits or bugs in the algorithms. Which is fine in my mind, because multiple HFT algorithms used by different actors will offset gains created by employing them for short term transactions, and people really should be looking at long term trading in the market anyway.
Some people complain that they are skimming profits from investors by adding additional costs, but really what they seem to be doing is causing a discreet (step like) graph smoother by adding in additional price points. Keep in mind that while they cause a buyer to get less of a profit while buying into a rising stock, they also can prevent a seller from losing as much when selling off a falling stock. It is a two way street.
The real thing to be concerned about in my mind, is that markets are inherently chaotic (in the math sense of the word), and using an algorithm to conduct trades in such an environment is just asking to lose money. And that is fine if you are a private investor playing with your own money, it is very worrying when you are playing with mutual funds, 401ks, etc that have large numbers of people's saving in them. Most people don't have a real grasp of chaos math, and software algorithms, and as a result don't realize the risks that are involved with HFT.
HA! I just wasted some of your bandwidth with a frivolous sig!
There is debate about whether HFT provides more liquidity. I am of the opinion that it does. HFT is used to make quotes, an order pair with a bid and an ask price [and quantities]. When there is a market in something, you can buy it or sell it. Without a market the thing you want to buy or sell is illiquid, and a trade cannot take place. Correctly-written HFT algorithms can enter orders of magnitudes more quotes than a manual or semi-manual process and importantly adjust those quotes when they become out of line, replacing them with new quotes. HFT also reduces the gap between bid and ask prices because an asking price that's too cheap or a selling price that's too low is more quickly eliminated (executed as a trade).
HFT then gives you a great idea of the price of something and the ability to execute a trade at that price or close to it. It's like going to the grocery store and being able to buy a dozen apples for between $2.00 and $2.01. In the past, roughly speaking, you might not be able to buy those apples at all or the price range would have been between $1.90 and $2.10. Maybe a better analogy would be that tangelo would not have been available to you in the past for a reasonable price because nobody wants to sell it at that reasonable price for fear of losing money.
A great example of computers providing liquidity is craigslist. Want to get rid of that couch? For a nill transaction cost you can enter a sell order of $50.00 + pick up with a quantity of one and in this liquid market you will have a high probability of a successful execution. The Internet has made your old couch into a now more liquid asset. HFT is like that, except with orders of magnitude higher speeds.
your analysis is only correct if the HFT is smarter than the people buying and selling. if it is 'dumber' because the people it is buying and selling from then is is just losing money. There is no evidence I have seen that HFT algorithims are actually any smarter, just more aware of micro fluctuations that may or may not be relevant.
HA! I just wasted some of your bandwidth with a frivolous sig!
If the HFT really gets access to trades being made by others before they are posted, then the SEC can bust them for insider trading.
I think that HFT are just looking for patterns in trading and making short term bets against identified trends, which is just fine. You do the same thing if you buy a stock and hold it for a year when compared to someone who holds a stock for 30 years.
HA! I just wasted some of your bandwidth with a frivolous sig!
If the banks can get rid of the overpaid traders, maybe their fees would also drop?
Lol, yeah right. These guys know how to look after their own. Note how they receive massive bonus payments regardless of poor performance.
Someone save us and our investments from these bwankers.
A stupid question: shouldn't there be a sales tax for stock transfers?
I do not believe in karma. "Funny"=-6. Do good and forbid evil. Yours, Oft-Offtopic Flamebaiting Troll.
Certainly no chance of emergent behavior causing unpredictable behavior. Wait, did another flash crash just happen?
Please do not read this sig. Thank you.
Check out some of the whitepapers Nanex releases on what they see from all the market data.
Nanex Analysis
Here's a quick primer:
* HFT is basically situating your own servers in the same machine room as the exchange computers. Then they are given ammunition in the form of 'flash orders'... orders which either fill instantly or are aborted. The HFT computers basically post these flash orders as quickly as they can. When the SEC tested raising the transaction limit for HFT traders to 1 milllion transactions a second the HFT computer's order volume instantly filled the gap and ran at 1 million transactions a second.
* Most of these transactions don't actually do anything. They are 'discovery' transactions or they are simply designed to cause other computer trading algorithms to go haywire by delaying the consolidated tape.
* HFT does not add liquidity to the market. Think about that a moment... if cycling a few millions dollars continuously around in a circle added liquidity to the market then anyone could do it and the market would magically be infinity liquid. There is no argument here. Only people who don't understand how the market works thinks HFT might be able to add liquidity to it. It absolutely does not. This was obvious in several flash crashes where algorithmic trading systems tried to trade into what they thought was liquidity and the HFT algorithms withdrew that liquidity in an instant. Boom, gone. Liquidity you can withdraw in 1 microsecond is not liquidity.
* The primary mechanism for HFT to make money is to create delays in the consolidated tape in order to create wider differences between exchanges for the same ticker symbol, then use those differences to arbitrage a small profit using colocated servers at each location. In this manner HFT might actually aid in price-discovery to some degree, if not for the fact that the price 'discovery' you see on your screen is going to be a few seconds old due to the delay in the consolidated tape. So... no.
* HFT can cause normal algorithmic trading to blow up spectacularly. Normal algorithmic trading depends on prices being accurate (think about that... most computer programs go haywire if presented with inaccurate input). HFT causes prices to be inaccurate, sometimes by a lot, allowing HFT algorithms to blow up algorithmic trading algorithms. I would say they do this on purpose... but the more confusion they can cause the more profit they make.
* HFT primarily hurts institutional traders because HFT algorithms can use flash orders to probe the limits of the institutional trader's orders and then front-run them.
* HFT *IS* front-running. That's what a flash order basically allows them to do. They can come in $0.001 in front of normal traders (who can only quote prices in cents.. $0.01) and take the market making away from the legitimate seller. Many exchanges have incentives for adding liquidity. HFT can take that market making away from the legitimate buyer or seller and get the incentive. P.S. this is one reason why institutional investors are screaming angry at the exchanges for allowing HFT. HFT is stealing their exchange incentives.
* HFT does not really hurt individual investors like you and me, unless we're stupid or we try to day-trade against them or we're stupid and use market orders. Our orders are just too small and as human beings we can often see when algorithmic breakdowns create massive buying or selling opportunities and take advantage of that. I've traded these opportunities pretty much since the crash and never lost. They don't happen very often but they're fun to trade when they do. Mostly, though, for those of us who work investments in longer time spans (months or years instead of minutes or hours or days), the algorithmic and HFT trading shenanigans only create more obvious opportunities.
Institutional traders can't really take advantage of these opportunities unless the breakdown is of truly massive proportions. It's happened in a few cases but, oddly enough, the 'flash crash' the media talks about isn't one of them. It simply didn't last long enough. Action on Bo
Centrally planned economies are NP-hard. That's the first argument against them. The second is probably the USSR. As you decentralize planning, you break the problem down into smaller and smaller problems, but lose the guarantee of global optimality (except under certain unrealistic conditions - Pareto efficiency, but then you might as well roll free-market anyway).
The justification for private ownership of capital is property rights. Whether you derive those rights from self-ownership or religion is irrelevant. What is lacking is justification for the theft of that private property, which you fail to supply.
Additionally, at the end of the day, social priorities - even if computationally ranked - are defined by the axiomatic system from which we derive our morality. The idea of computing axioms is kind of circular. What mathematical formula would you like to optimize to choose between libertarianism and communitarianism? What isGood() function do you propose?
you can get everything you just stated from a human based 'open outcry' (people yelling) market. you get liquidity and you get 'price discovery' and you get efficiency (the price gap closing).
Leah McGrath Goodman, who wrote a book about Nymex, just posted on her blog a while back that oil traders have been emailing her telling her that 'price discovery' has broken down on the modern electronic oil market. In her book, she quotes a lot of traders saying that they believe that the anonymous nature of electronic markets allows gigantic investors like hedge funds and big banks to manipulate prices.
Nymex went electronic in 2006 - since then we've had the two biggest oil spikes in history. correlation is not causation, but its the first step to proving it.
congrats, you just invented the latest shitty financial insurance product for JP Morgan to cram into bundles and sell as a "solid investment" to widows and orphans.
i dont eat IBM stock for dinner, but I eat corn and soybeans.
Leah McGrath Goodman just wrote a book about the history of Nymex, which is a commodities exchange as opposed to a stock exchange. She says that oil traders have been emailing her telling her that price discovery has recently broken down in the oil market (which went electronic circa 2006).
though. Soviet Russia was one of it's biggest customers, with Nazi Germany and FDR's New Deal America (think social security on punch cards) being other major consumers.
surely, surely there is a way to model markets, where you can decide how many members are speculating vs how many are there for some non-speculative purpose?
what about game theory? what about video games with in-game markets?
honestly, most people's daily lives are impacted far more by the commodities markets and the debt markets (the latter of which dont even occur on exchanges) than the stock market.
It always amuses me how libertarians who wish to criticise socialism (which to them means any economic system other than the outright market-driven insanity they favour) invoke the 'socialist calculation problem' to insist no economic solution, besides the one they intuited when they were 15 years old and reading Ayn Rand, can ever work.
The idea is that there is something magical in markets, something in the interaction between rational maximisers, that can't be reproduced analytically. Except that is exactly how modern capitalism functions. The notion that prices are determined by canny entrepreneurs belongs in the 19th century not the 21st.
If we can put a man on the moon, why can't we shoot people for Apollo-related non-sequiturs?
That doesn't mean that humans aren't needed to do the sleeping, the eating and the watching.
maybe this played a part in the recession we're experiencing? using algorithms doesn't necessarily denote a successful market environment, not to mention it being unfair to the "human" players. but I guess that's part of the market, innit.
I'd love to read it.
Is when someone/a computer buys some stocks and then sells them for a profit 1 second/minute/hour/day/month latter, where does the money come from?
I mean someone has to lose it right? So who just lost it all the money you just made in potentially a fraction of a second (before anyone could even get the money you just spent on the stock).
Troll is not a replacement for I disagree.
And humans are less likely to have that, right? Because we have never had economic cycles, bubbles; and all government regulations went exactly like how they were supposed to be. But seriously, if we speed up everything, we will have much smaller bubbles and cycles.
What he's proposing is that algorithmic trading should not be accepted as a substitute for human decision making.
How many slashdot articles could I write?
Algorithmic _________ Rapidly Replacing Need for Humans
-3D CAD
-Assembly of Manufactured goods
-Design of Computers
-spreadsheet
-Any industry utilizing computers to solve problems
When computers replace humans for jobs, sometimes it's for the better. I look back on my undergraduate ME experience, and we were using 3D CAD programs developed with advanced matrix math algorithms from the past few decades. It reduced the demand for Mechanical Drafters until the point that the position barely exists. It's not a bad thing in itself, it's the consequence of pursuing computation as a solution to our problems. However, it doesn't replace the need for skilled employees. Just because you can CAD beautiful shapes in 3D modeling programs doesn't mean you can generate money for a company. Same goes for implicit differentiation of heat transfer problems.
Nice presentation from Kevin Slavin @ TED: http://www.ted.com/talks/kevin_slavin_how_algorithms_shape_our_world.html
The stock markets are no longer about investing in companies you believe in or who have a solid track record.
I believed they ceased to be that circa 1720 with the South Sea Bubble. This was less than 40 years after the first stock market in the world was founded.
The available academic studies on that crash suggest that while HFT was involved, the primary cause was decisions made by large hedge funds, which caused both HFT systems and human market makers to panic and get out of the market. It would have happened whether HFT was in use or not.
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That "shut up or I'll replace you with a very small script" applies to investment bankers?
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
... Automated trading would be called botting and would be verboten.
You must not forget, trading is a zero-sum-game, so whatever someone wins, somewbody else has to lose...
I love your post "Ann Coward" about Goldie Laux. I am a small trader who has been trading since 1984, we once had the greatest advantage against the MMs by using the SOES system after the 1987 debacle. Now even with a ISP connection t3 and three of Dells best dual core processors, I am amazed at how I can never get a fill with their "Flash Orders" on NYSE or Nasdaq. HFTS, now you must have access to data that is 100,000 of a second fast, (I thought 1/10,000 sec was fast.) as well as access to LightSpeed data (Nasdaq Super Montage and NYSE Order Book) are not so hot. Keep up the stories about Goldie, we can all learn from your experience and enjoy them! peace
Here is the paper : The Future of Computer Trading in Financial Markets Working paper Foresight, Government Office for Science This working paper has been commissioned as part of the UK Government’s Foresight Project on The Future of Computer Trading in Financial Markets. www.bis.gov.uk/assets/bispartners/foresight/docs/computer-trading/11-1276-the-future-of-computer-trading-in-financial-markets