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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.'"
Every time I buy a stock or sell one, the IRS and other taxing authorities suck some money out of me.
When these computers buy and sell shares several times a second, they do not get taxed. That is not fair.
I'm pretty sure the IRS gets their cut too. But they get a cut of profits just like they do of your profits.
There should be a tax maybe .001 cents per transaction.
Why? No one has explained why anything needs to be done at all. It's all "rich people are making money therefore we need to screw it up for them".
That would cut the amount of chatter and computer predation.
And why is that considered a good thing? I think we need more chatter and computer predation.
Some of these systems see what slow dim you are going to buy, jump ahead of you in line, buy it and then sell it to you.
No, they don't. They don't have ESP. They can't see what you do on a market before you actually do something on the market.
Why?
Because we, the people, end up bailing out these irresponsible fuckers who have turned Wallstreet into a casino. The next bailout better be paid in advance by those who caused it, hence a tax on gambling with stocks.
So they get to play computer games, where the victims are ordinary people's savings, pensions, etc.
Only if those people give them their savings to play with.
Because we, the people, end up bailing out these irresponsible fuckers who have turned Wallstreet into a casino.
Did you decide to bail anyone?
Did you have any choice in whether to bail them?
Did you have any power at all?
We, the people, didn't bail anything nor anyone. We were robbed of a fraction of our production by the powerful and THEY bailed the banks, because THEY are the ones with a lot of money inside those banks.
The next bailout better be paid in advance by those who caused it, hence a tax on gambling with stocks.
The next bailout will be paid by the government. And the people have no money, nor voice, nor power to stop that.
Please, don't disparage the good folks in the probabilistic entertainment area of the hospitality sector by such comparisons.
Casinos may be tacky; and they do suck some gambling addicts dry; but their danger to the larger economy, and to parties who don't choose to deal with them, is quite minimal. Even better, because of their tackiness and the widespread knowledge of how foolish it is to work with them when greater-than-recreational amounts of money are on the line, nobody proposes massive bailouts, or handing social security over to them to manage!
The vermin only teaze and pinch
Their foes superior by an inch.
So, naturalists observe, a flea
Has smaller fleas that on him prey;
And these have smaller still to bite 'em,
And so proceed ad infinitum.
If the stock market made sense, it wouldn't work.
rewriting history since 2109
Consider the following quote from the paper
This statement implies that the authors believe a gaussian model "should" apply to the market dynamics. As Benoit Mandelbrot and many others before and after him point out, financial markets never have followed gaussian dynamics and they probably never will. It's especially silly because they go on to analyze the distribution of Ultrafast Extreme Event (UEE) sizes as a power law.
Today's market has both accumulation algorithms now used by mutual funds and other sophisticated "buy and hold" investors, and market-making algorithms used by HF firms, and I fully believe there is some interesting dynamics arising from all that. Whether it is any weirder than the slower, human-derived, dynamics of yesteryear is still in doubt. Humans are so much more complex than any of those algorithms that I suspect if you examined the market behavior in 1980, and sped it up, you would see plots wilder than anything Nanex produces.
The paper is somewhat interesting, but not very convincing.
As long as there's risk, it's not arbitrage. A small risk over thousands or more orders can become a big risk. And the AC didn't say "big orders". And even a human market maker can move fast enough to exploit big order trading. That was as I see it one of the big reasons why some people could make money at day trading, for example.
Money is a form of power. Letting the rich get richer without limit lets them concentrate power in their hands without limit. This, in turn, leads to a dictatorship: it's not exactly a secret that the Government does whatever it's corporate masters tell it to.
Besides, stock market is a zero-sum game. It generates no value, therefore every single cent a HFT makes comes out of someone else's pocket. So if the rich get richer the poor get poorer and suffer needless economic hardship, all just a few people can live in a lap of luxury.
It's about time to acknowledge that the 1% are waging a class war against the rest of humanity and start fighting back. Or at least I will; you, of course, are free to lick the boot that stomps on your face, if it makes you feel you're vicariously succesful.
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.
To be quite complete, all trades happen at an agreed upon price and if the HFT algorithm is involved its because its got the current highest bid or lowest ask out there.
You will notice that nobody ever has anything to say about this fact being somehow bad. The arguments, 'cept for one, is indeed a combinations of "its evil algorithms" hand waving and "its evil rich people" hand waving.
The one valid argument is that the markets sometimes halt trading and undo previous orders, and since HFT's hit the scene its always been because of HFT's. The solution isnt to stop HFT trading... its to stop these do-overs that prevent algorithmic traders from taking very large losses: Market regulation has distorted the true risks. Restore the true risks and let the bad HFT's fail big once in awhile.
Simple.
"His name was James Damore."