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This Is What Wall Street's Terrifying Robot Invasion Looks Like
pigrabbitbear writes "Given the the endless mind-whirling acronyms, derivatives and structures of the financial markets, we're rarely served with a visualization that so elegantly illustrates the arrival of Wall Street's latest innovation. This is what High Frequency Trading — the official monicker of Wall Street's robot army — looks like, when specially programmed computers make massive bets at lightning speed. Created by Nanex, the GIF charts the rise of HFT trading volumes across all U.S. stock exchanges between 2007 and 2012. The initial murmur, the brewing storm, the final detonation: Not just unsettling, it's terrifying."
Human behavior.
Bubbles exist when the market becomes disconnected from the true value (if there is such a thing!) of the asset...
I don't know much about HFT, but I am pretty sure that the HFT algos no nothing about the true value of the asset, and they are just gaming the markets.
When most of the trades in the market are traders trying to out-gaming each other, that can't be healthy.
where you're destroying a resource
...which isn't yours, and you have no long term interest in
in exchange for a one-time benefit of briefly being faster than your competitors.
...during which period you made several hundred million dollars.
Tragedy of the commons
Just because you're paranoid doesn't mean there isn't an invisible demon about to eat your face
Knight Capital, a conservative market-maker, is going bankrupt because it's automated trading algorithms ran for 30 minutes in a poor configuration (losing money on each trade). How much did they lose? About $440 million dollars. In 30 minutes. Because someone didn't make it to the STOP command in time.
Not a bubble, just a way to destroy an organization in an automated fashion very quickly.
Market liquidity is extremely important.
Lets assume for a second that it is important to be able to trade a hundred times a second, which isn't even an exaggeration of what's already happening.
Then, logically, one would expect the entire financial world collapse every night when the markets close for hours.
Oh wait, nothing happens, and everything continues like normal the next morning!
Hence, the assumption that high-speed trading is vital is clearly false.
It's one thing to have a high volume of real trades, but it's entirely another thing to have a ludicrous volume of very small meaningless trades by third-parties that neither want to buy nor sell, but just want to "play the game" and skim off the top.
If I take droppings from a bunch of individual chickens, put them together, cook them a little, and then sell them as "Chicken derived high-fiber compound", I can't very well lie to you and tell you that I'm not selling you shit.
-- Let us endeavor so to live that when we pass even the undertaker shall be sorry. -- M. Twain
And that is why the use of computers is better, because it enables the transparency you crave.
Could you define "transparency" for us? Because you don't seem to mean it the same way as the rest of the world.
HFT may indeed have created something resembling "transparency", but only insofar as it has made the entire market no more meaningful than a biased random number generator. What does it mean to conservatively invest in a company with strong financials and good growth potential, when entire sectors rise and fall with near-perfect correlation? Or more to the point, why do we even have a stock market?
If it makes me a Luddite that I believe "investing" should have at least something to do with lending someone with an idea money in exchange for a cut of the profits, then I'll accept that crown proudly. When "investing" means trying to game the underlying system, do we really wonder why the economy sucks?
We desperately need to implement at least one one of two really, really simple solutions - A transaction tax, and an end to intraday trading. Either of these would kill HFT overnight, and good riddance!
Get this through your obviously misguided head:
-wall street does *not* exist for the purposes of making money for those who play there
-wall street exists for people to take ownership of businesses they have confidence in and feel will grow as a good investment.
-making money is supposed to be a consequence of the business' positivity in the real world and how the investment played a role in that business.
The markets, despite your confusion, or the claims made by the new wave of exploitative greedy shitbags, are to facilitate publicly available ownership of businesses that have real presence, employees, products, and consequences.
Just because shitbags have turned the markets into exploits and dragged our leadership through bed with them, doesn't make their claims about what the market is for 'correct'. It just means that the oligarchy has persitent rhetoric and have established law to uphold it.