Slashdot Mirror
Flash Mobs of Trading Robots Coalescing To Rule Markets
An anonymous reader writes "Financial markets experienced a series of computer glitches recently that brought operations to a halt. According to a researcher at the University of Miami, mobs of ultrafast robots, which trade and operate at speeds beyond human capability, may be responsible for these "flash freezes". From the article: '"Even though each trading algorithm/robot is out to gain a profit at the expense of any other, and hence act as a predator, any algorithm which is trading has a market impact and hence can become noticeable to other algorithms," said Neil Johnson, a professor of physics at the College of Arts and Sciences at the University of Miami (UM) and lead author of the new study. "So although they are all predators, some can then become the prey of other algorithms depending on the conditions. Just like animal predators can also fall prey to each other." When there's a normal combination of prey and predators, he says, everything is in balance. But once predators are introduced that are too fast, they create extreme events.'"
No, they are taxed on their profit. They are even taxed on their potential profit. “Trading Positions” are taxed on their unrealized loss at the end of every year. So in fact they have to pay more profits.
And there has been a lot of debate on the effect of a Tobin tax the actual effect has been less then advertised. When France introduced one last they got more volatility, lower liquidity, and higher spreads. The last 2 imply that the middle men (such as HFT) were making more money per trade and “stealing” more profits from small stock traders.
I know of no pure HFT company that was bailed out. Some banks have HFT divisions, but that's incidental to their problems and eventual bailout.
Botnets are a coordinated networks of computers under a single malicious control. However, these trading 'robots' are individual computers under malicious control. They may seem like they coordinate with one another but they operate completely independently, reacting to the market not to some master controller.