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The Almighty Buck Technology

Flash Mobs of Trading Robots Coalescing To Rule Markets 251

Posted by samzenpus
from the john-henry dept.
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.'"
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Flash Mobs of Trading Robots Coalescing To Rule Markets

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  • by Anonymous Coward on Thursday September 12, 2013 @08:15AM (#44828569)

    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.
    There should be a tax maybe .001 cents per transaction. That would cut the amount of 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.
    You do not get the best price, they get a profit. If they were taxed on both ends of that, they would not do it and you would get a better price.

    • by khallow (566160) on Thursday September 12, 2013 @08:21AM (#44828595)

      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.

      • by Anonymous Coward on Thursday September 12, 2013 @08:26AM (#44828637)

        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.

        • by Thanshin (1188877) on Thursday September 12, 2013 @08:33AM (#44828699)

          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.

        • by fuzzyfuzzyfungus (1223518) on Thursday September 12, 2013 @08:38AM (#44828741) Journal
          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!
        • by tolkienfan (892463) on Thursday September 12, 2013 @08:46AM (#44828821) Journal

          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.

        • Because we, the people, end up bailing out these irresponsible fuckers who have turned Wallstreet into a casino.

          Except the bailout that nothing whatsoever to do with HFT. It also had nothing to do with Wall Street being a "casino". In fact, it was the exact opposite. The banks underestimated the systemic (non-random) risk.

      • 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.

        That's a bit of a silly thing to say, unless you actually believe that ESP would be necessary to see what is about to happen in a market. I don't know if you've given any real thought to this at all: but before a buyer and a seller can meet to make a trade they both need to signal that they have the intention to do so.

        • by khallow (566160)

          unless you actually believe that ESP would be necessary to see what is about to happen in a market

          Yep. When you're trying to predict someone's actions without some sort of information on what they're going to trade, then it is ESP.

          I don't know if you've given any real thought to this at all: but before a buyer and a seller can meet to make a trade they both need to signal that they have the intention to do so.

          Yea, that was done when the buyers and sellers got access to the stock market, which could have been years ago. There's no magic signal of intent to trade before an order is placed.

          • by jbengt (874751)

            . . . before a buyer and a seller can meet to make a trade they both need to signal that they have the intention to do so.

            . . . There's no magic signal of intent to trade before an order is placed.

            I believe you are wrong. For a seller to sell, they first have to offer stock for sale at a price; for a buyer to buy, they first have to offer to buy stock at a price (or at least one of those has to happen). If they don't agree on the price, there is no sale, but there is a signal of intent that "everyone" can see ("everyone" being those that are fast enough).

          • You seem to be content to argue from a position of ignorance. Maybe if you started with a very basic description [wikipedia.org] you would learn the difference between an offer and the execution of an order. I'm sure that you would be capable of understanding if you tried.

      • Re: (Score:3, Informative)

        by Xest (935314)

        "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"."

        So your view is that people should be able to make money no matter what the cost and that making money is the single key thing that should come above all else?

        How far are you willing to back that argument? At one extreme, if a military commander manages to pull of a bloody coup in the US and seizes the money of all the bankers and uses his new found power to ret

        • That is not what he said. What he said is that when all you have to say against something is that it is bad because the rich are making money you have no argument.

          The rest of your argument is just a bunch of suppositions without any real data to substantiate. Nobody was able to prove that HFT is more dangerous than normal trading or that it has any adverse effects on the economy. There is even analysts who defend that HFT have a very positive effect in the economy by adding liquidity to the market.
          • by Xest (935314)

            "That is not what he said. What he said is that when all you have to say against something is that it is bad because the rich are making money you have no argument. "

            But no one said that. That was speculation on his behalf as to people's distaste for it. You can't say someone has no argument based on a certain opinion if they never actually expressed that opinion.

            "The rest of your argument is just a bunch of suppositions without any real data to substantiate."

            Actually most of my argument was simply a series

            • But no one said that. That was speculation on his behalf as to people's distaste for it. You can't say someone has no argument based on a certain opinion if they never actually expressed that opinion.

              This speculation is substantiated by your complete lack of objective reasons to forbid it and your wish to do so even then.

              Furthermore you are doing exactly what you are criticizing on him. This assertion you made is not backed by anything, for example:

              HFT has a real impact on world economies and often unpredictably so.

              Your whole point is that things should be forbidden unless proven useful. That is ridiculous and undesirable in a free society. In a free society things should only be forbidden when they are proven harmful, which is not the case with HFT.

              • by Xest (935314)

                "This speculation is substantiated by your complete lack of objective reasons to forbid it and your wish to do so even then. "

                I provided a reason, but it's not my fault you're not educated enough to understand that reason. If you don't understand why these sorts of systems are chaotic, why chaotic systems are unpredictable, and how a chaotic system with the ability to interact with and effect an important area of society could lead to potential harm then that's not my problem - you just need to go and learn

        • by khallow (566160)

          So your view is that people should be able to make money no matter what the cost and that making money is the single key thing that should come above all else?

          Yet again, the irrational bullshit comes out. Note I said "why anything needs to be done". What makes you think that I wouldn't have considered high "cost" a valid reason?

          To turn the argument around, why do you think this sort of system should've been allowed in the first place?

          A good question and here's some answers. First, the US is something of a democracy. That means people should be free to act in the absence of the above harm you speak of. So IF the activity doesn't harm someone, then a free country wouldn't ban the activity, be it gay marriage or some hypothetical harmless version of high frequency trading.

          Second, it is foolish to ignore the benefit of an activity just because it doesn't directly benefit you. As I've noted before, fast trading generates liquidity in a market, quickens market response to new information, and funds some cool technology development that can be used for other things than just trading stocks. This activity also tests all those other computer trading programs out there, leading to better trading programs overall.

          It's just a niche, but in turn the benefits of improving that niche flow to other sectors of the economy and eventually to you.

          Third, the harm of fast trading is greatly overstated. Virtually every ill I've seen claimed of it is due either to unrelated policies (like too big to fail, insider trading, order fronting, "corporations", etc) or imaginary (the program figures out via ESP what you're going to do before you do it and then fronts your 100 share trade - griefing the markets!).

      • by Anonymous Coward on Thursday September 12, 2013 @09:14AM (#44829077)

        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.

        Actually they do have esp.
        They can see what order you have placed before it is fulfilled.
        Have you not heard of level 2 market data.
        Pay for it and you can see what orders are placed - volume, bid/ask price, trading organisation.
        Combine that with super high speed connections to the exchange and you can see transactions at the millisecond and act on them.

        Off topic:
        If you've ever traded you may have spotted the effects of high frequency when using candlestick charts at the 1 minute timeframe.
        You will see long repeated sequences of Bull Candle, Bear Candle of the same size over a short time scale (seconds)
        Thats proof of Banks and institutional traders bots / algorithms fighting for price power.

        8 Years ago you would be lucky to have spotted a dozen a year.
        Nowadays there's one everyday if you know which instrument to look at.

        • by khallow (566160)

          They can see what order you have placed before it is fulfilled.

          But they can't beat you to the market. They can't insert their order ahead of yours on the order queue without it becoming insider trading or a case of ESP.

          • by Anonymous Coward

            Saly, you're wrong. They can. Say you have a bid at $10.00 and the spread is $0.01. You're on top of the order book right? Nobody can step in front unless they actually buy the ask lot, 'cause the pricing granularity is $0.01. Bzzzzzzt! Wrong. HFT shops have (among others) an exception and can bid in increments of 0$.0001 to *ahem* provide liquidity. So an algo can (and likely will, if needed) step in front of you at $10.0001. Suddenly, gaming the system just got a fraction of a cent easier.

      • by rwv (1636355)

        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".

        Usage taxes are very common. Many jurisdictions have toll roads and parking meters for collecting funds when users elect to use those public resources. Congress controls interstate commerce within which these equity markets are classified and holds the rights to act when members of the public are misusing a market. I can't say whether I believe that trading algorithms are misusing the market, but it would be completely rational for Congress to institute a usage tax on equity market transactions if they f

        • by khallow (566160)

          Usage taxes are very common.

          The government isn't providing anything per "use" of the stock market. So that rationalization doesn't soar.

          I can't say whether I believe that trading algorithms are misusing the market, but it would be completely rational for Congress to institute a usage tax on equity market transactions if they felt misuse was occurring.

          Congress "feels" all sorts of things, many which are purely imaginary or feigned. I propose a much higher standard - actual documented harm rather than what the local crazy man convention decided to do that day.

      • Re: (Score:3, Insightful)

        by ultranova (717540)

        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".

        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

      • by Araes (1177047)
        Yes they can, and yes they do. Front running (or things that look suspiciously like it) happen constantly on the electronic exchanges. Flash trading is a form of trading in which certain market participants are allowed to see incoming orders to buy or sell securities very slightly earlier than the general market participants, typically 30 milliseconds, in exchange for a fee. This feature was introduced to allow participants like market makers the opportunity to meet or improve on the National best bid an
    • by Thanshin (1188877) on Thursday September 12, 2013 @08:21AM (#44828605)

      When these computers buy and sell shares several times a second, they do not get taxed. That is not fair.

      Laws aren't made to be fair.

      There should be a tax maybe .001 cents per transaction. That would cut the amount of chatter and computer predation.

      That would go against the people who make the laws.

      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.
      You do not get the best price, they get a profit. If they were taxed on both ends of that, they would not do it and you would get a better price.

      And that's the reason for such tax not to exist. Because you getting a better price is not the desired outcome.

    • by alexander_686 (957440) on Thursday September 12, 2013 @08:28AM (#44828659)

      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.

    • You could trade directly on the exchange too.
      How is it unfair when you choose to go thru a broker?

    • 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. There should be a tax maybe .001 cents per transaction.

      No they don't. The IRS only takes a bite if you make a profit buying or selling stock. It is called capital gains tax. What you may be thinking of is the fee that your brokerage charges for making a transaction.

      Professional trading firms also get charged fees by whatever exchange they are trading on, charged per transaction, and they get taxed on any profits generated. Just like you!

    • Taxing transactions is one of the most moronic ideas in human history. Financial markets are fungible and global beyond almost anything else. All it will take is one country looking to add to it's GNP and ALL markets will move there.

      France has been pushing this. If they ever implement it will provide an interesting object lesson in dumb.

      Ultimately the fact is that HFT is self-defeating. Once you implement it competition between the robots will eventually eliminate all financial gain through HFT. It's alread

  • by Rosco P. Coltrane (209368) on Thursday September 12, 2013 @08:16AM (#44828575)

    This sort of financial activities is complete economic nonsense, as it brings nothing of value to people, companies or other concerns that actually produce something useful to society as a whole. Just reading the /. blurb should be enough to convince anyone that "robot trading" is a parasitic activity that should be taxed to oblivion - by ways of a tax based on the speed of trading for instance - and financial markets forced to become what they're supposed to be: places for investors to invest in real economic activities for the long haul.

    • by drinkypoo (153816)

      All you'd have to do in order to fix this is delay all trades significantly. You don't have to care then if a human or a robot is trading. If the goal is to permit exchange of long-term investments, then there's no reason to permit rapid trading in any case.

      • Yes, but allowing it and taxing the hell out of it would bring some of that money back into the government's pocket - or see it another way, the financial sumbitches that are bleeding most countries' economies white without any remorse today would have to start paying back some.

        If a tax is levied on the speed of trading, at some point an equilibrium would be reached at which traders would consider the level of taxation acceptable: they wouldn't stop speed-trading, just doing it at a speed/cost that they're

        • by drinkypoo (153816)

          Better to collect money that way than to ban the activity altogether and collect no money at all.

          That raises the question, is it better to collect money than to ban the activity? Because I for one do not really see the need to hand the government more money when they will use it primarily for bombing brown people for economic gain.

      • by khallow (566160)

        If the goal is to permit exchange of long-term investments, then there's no reason to permit rapid trading in any case.

        Sure, there is. Higher liquidity and better market responsiveness to new knowledge.

        There's all this talk about the best way to break the markets so really fast trading can't happen. But we're putting the cart before the horse. The case for banning fast trading doesn't exist. Most such reasons turn out either unrelated to fast trading (such as trading through a brokerage which fronts the trade by default because you made them the middle man in your transaction) or attributing mystical powers to fast tradi

        • Re: (Score:3, Interesting)

          by drinkypoo (153816)

          Sure, there is. Higher liquidity and better market responsiveness to new knowledge.

          Higher liquidity is primarily a benefit to corporations, which are a legal fiction which has no reason to exist if it does not benefit the public.

          The case for banning fast trading doesn't exist.

          I just made it.

          Most such reasons turn out either unrelated to fast trading

          Straw man. We are currently specifically having a conversation in the context of discussing a problem which is caused by fast trading.

          or attributing mystical powers to fast trading

          Straw man. You're talking about some nutter, which has nothing to do with me.

          If the best you can do is engage in logical fallacy, you clearly have nothing of value to say. Please move along.

          • by khallow (566160)

            Higher liquidity is primarily a benefit to corporations, which are a legal fiction which has no reason to exist if it does not benefit the public.

            But it does. It enables transactions of assets in a low risk way that would otherwise have to rigged via a complex loan. That employs people, gets things done, generates tax revenue, and generally improves the lot of society.

            Straw man. We are currently specifically having a conversation in the context of discussing a problem which is caused by fast trading.

            What problem? We're discussing phenomena of fast trading (such as the alleged "coalescing" of "flash mobs" of computer traders). We haven't actually gotten to any problems.

            Straw man. You're talking about some nutter, which has nothing to do with me.

            Whatever. I already am seeing the same sort of non sequiturs and unfounded claims. Why in the world, for example, d

            • by drinkypoo (153816)

              Higher liquidity is primarily a benefit to corporations, which are a legal fiction which has no reason to exist if it does not benefit the public.

              But it does. It enables transactions of assets in a low risk way that would otherwise have to rigged via a complex loan.

              That objection would make sense if I had suggested delaying trades for days or longer periods, but I have made no such suggestion. In fact, I suspect that a delay of hours would be sufficient, if it would even take more than one of those. But you made assumptions, which shockingly turned out to be incorrect.

              Why in the world, for example, did you bother to claim that "corporations, which are a legal fiction which has no reason to exist if it does not benefit the public" or that you had by making that uninteresting and irrelevant observation made a case for the banning of fast trade?

              It's not irrelevant just because you say it is, but it is irrelevant when you bring up shit I didn't even say and then attack it in front of me as if anyone should care. The nature of corporations and th

              • by khallow (566160)

                But it does. It enables transactions of assets in a low risk way that would otherwise have to rigged via a complex loan.

                That objection would make sense if I had suggested delaying trades for days or longer periods, but I have made no such suggestion. In fact, I suspect that a delay of hours would be sufficient, if it would even take more than one of those. But you made assumptions, which shockingly turned out to be incorrect.

                That is interesting. I meant corporations not fast trading. That the response also works for fast trading is happy coincidence.

                The nature of corporations and that they are the primary benefactors of a bad law is always relevant when you're talking about the law.

                We weren't speaking of such bad law.

          • Nonsense. Corporations are owned by people. They don't exist in a vacuum. Almost everyone in America, through pension plans, personal savings, or state bond issues has an investment in financial markets.

            People, like me, who invest in the stock market benefit tremendously through high levels of liquidity.

            When I go online and place an order to sell stock, and see that order filled in a fraction of a second at exactly the quoted price (with bid-ask spreads on the order of one cent) I really do appreciate havin

    • by Thanshin (1188877)

      Why should they bring value to the people? They aren't owned by the people.

      They are tools made to make money for those who already have a huge lot and would like to have more. "The people" isn't in that club.

    • by khallow (566160)

      This sort of financial activities is complete economic nonsense, as it brings nothing of value to people, companies or other concerns that actually produce something useful to society as a whole.

      There's the usual benefits of better market liquidity and faster market response. The arms race is also building some cool tech, meaning a boost for the high tech industry.

      You probably don't bring much to society either. So what?

      Just reading the /. blurb should be enough to convince anyone that "robot trading" is a parasitic activity that should be taxed to oblivion - by ways of a tax based on the speed of trading for instance - and financial markets forced to become what they're supposed to be: places for investors to invest in real economic activities for the long haul.

      And why should we do that and how is it going to do a thing for long term economic investment?

      If instead you actually want to do something useful for long term investment, then get rid of Too Big to Fail and other business welfare, and most, if not all, protectionism schemes.

    • by b4upoo (166390)

      You could make the case that almost all modern life does no good for humanity at all. To my eyes it seems like we are instituting a huge holocaust machine designed to ruin human life permanently. Take a look at the mass of concrete and blacktop called NYC. To suggest that it is sustainable is absurd. To not confront the fact that they are poisoning the public and that the ring of destruction does not reach out into rural areas takes a very narrow intelligence. Yet we have millions of citizens who rea

    • You know, the same argument was made about railroads back in the 1850s. The railroads added nothing of value because they created nothing - only moved things around. Moved things around at 20% of the old cost, but still only moved things around.

      Let us make a daring assumption that the Capital Markets actually create some value by allocating economic resources. If that is the case we can make the same case about algorithmic trading. They have done nothing except reduce the cost of trading by 80%.

      The differen

    • by rwv (1636355)

      This sort of financial activities is complete economic nonsense, as it brings nothing of value to people,

      Indeed, economics is a zero-sum game. For every dollar somebody gains, somebody else loses a dollar.

      companies or other concerns that actually produce something useful to society as a whole.

      So companies are good, but buying and selling ownership rights of companies is very, very bad.

      Just reading the /. blurb should be enough to convince anyone that "robot trading" is a parasitic activity that should be taxed to oblivion

      Not to mention the slice of the software industry whose bread-and-butter is "robot trading" software.

      - by ways of a tax based on the speed of trading for instance -

      "Sir, I pulled you over for doing 85 transactions per second in a 65 TPS zone."

      and financial markets forced to become what they're supposed to be:

      Financial tools for accumulating wealth?

      places for investors to invest in real economic activities for the long haul.

      So buying and selling ownership rights of companies is actually a good thing. I should get on th

    • by Entropius (188861)

      Perhaps it is economic nonsense, but does it harm anyone who isn't a voluntary participant? We don't live in a society where everything is forbidden except that which is permitted, but the reverse. Let people buy and sell as they see fit; there's no reason to make anything illegal (or tax it out of existence) unless there is clear fraud. These HFT people aren't making any money except by other people voluntarily handing it to them.

  • by Connie_Lingus (317691) on Thursday September 12, 2013 @08:21AM (#44828599) Homepage

    core wars [corewars.org] 2013

  • So they get to play computer games, where the victims are ordinary people's savings, pensions, etc. This really has to stop, as another poster suggested a .001 cents fee per transaction would be enough to do away with microsecond dealing.
    • by Thanshin (1188877) on Thursday September 12, 2013 @08:29AM (#44828667)

      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.

      • by Chrisq (894406)

        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.

        its hard to save without being at least indirectly effected. The very low interest rates are due to the recession and consequent easement process too.

        • by Thanshin (1188877)

          its hard to save without being at least indirectly effected.

          Oh really? What exactly stops you from putting the money in a box or buying gold?

          Maybe you mean "It's hard to play the same game they are playing, to create profit from my money without working for it, as they do, but to do it without the risks that they take.".

          • by Chrisq (894406)

            its hard to save without being at least indirectly effected.

            Oh really? What exactly stops you from putting the money in a box or buying gold?

            Maybe you mean "It's hard to play the same game they are playing, to create profit from my money without working for it, as they do, but to do it without the risks that they take.".

            Gold prices certainly affected by speculation [goldratefortoday.org]. As for putting it in a box - perfectly possible but you would be better off using a savings account even at today's low interest rates

  • Chaos, when a small perturbation allows a gain for a small action that one player has that others don't see.

    It is like playing poker with a card counter near the end of the deck, but you aren't counting. You lose.

  • by Anna Merikin (529843) on Thursday September 12, 2013 @08:32AM (#44828689) Journal

    Ultrafast bots trading on minuscule changes by algorithm within a market sensitive to policy adjustments real or suspected by the Federal Reserve Bank, which admits it acts slowly, deliberately and without transparency or effective oversight, cannot end well.

  • by fuzzyfuzzyfungus (1223518) on Thursday September 12, 2013 @08:39AM (#44828757) Journal
    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.
  • Predatory investing? (Score:5, Interesting)

    by Culture20 (968837) on Thursday September 12, 2013 @08:40AM (#44828761)
    Investment is a collaborative strategy, a symbiosis. Programming "investment bots" to be predatory is not a good thing. It introduces parasites into the mix.
    • by Lumpy (12016)

      Parasites are already in the mix, they are called investment bankers.

    • by fred911 (83970)

      This is trading, not investment. There's quite the good possibility that these accounts are flat at close. If they are trading or making market, they provide liquidity. As long as the exchange is capable of providing orderly processing where bids / asks are filled at best or most current pricing, limit orders will protect the human. For most, buying and selling at market gives the sharks the advantage, and can be just plain stupid.

      • by Culture20 (968837)
        Trading stock in companies exists to facilitate the transfer of investment. Investment is the end goal for society, not trades.
    • by khallow (566160)

      Investment is a collaborative strategy, a symbiosis. Programming "investment bots" to be predatory is not a good thing. It introduces parasites into the mix.

      Why isn't it a good thing? It's definitely collaboration since it culls weak strategies and computer trading programs that are more vulnerable to such "predation".

      • by Culture20 (968837)

        Why isn't it a good thing? It's definitely collaboration since it culls weak strategies and computer trading programs that are more vulnerable to such "predation".

        Because trading stocks is about the transfer of investment, not the transfer of wealth. Strategies shouldn't even enter in to the mix, let alone "computer trading strategies".
        Stock trading should be like the episode of "Everybody Loves Raymond" with the Hickidu cards. [wikia.com] Ray and the other kid's dad are all thinking about the dollar value of the cards, whereas the kids are interested in the cards themselves. Investors who see their stock in a company as a vehicle to get money by selling it don't really care

  • If (Score:3, Insightful)

    by JustOK (667959) on Thursday September 12, 2013 @08:42AM (#44828793) Journal

    If the stock market made sense, it wouldn't work.

  • It would be ironic is Skynet emerged not from a military defense system but from a trading bot in the financial system.

    • by Dark Fire (14267)

      It would be ironic IF Skynet emerged not from a military defense system but from a trading bot in the financial system.

  • That they cause some serious horrible problems and make them revert to NO trading software allowed all trades must go through a person on the floor. Honestly trading is getting too fast and far to volatile the human bottleneck is needed to smooth things out.

    • Ridiculous.

      Human beings are FAR more corrupt than any machine could be.

      I remember my father having to place stock orders over the telephone. The prices for this process were horrific compared to modern practices. Plus you got much worse execution and bid-ask spreads.

      The fact is the advantages of HFT are being worked out of the market and volumes are declining. Profit is being wrung out of the system. A few minor tweaks to the regulations (say imposing a 100 millisecond order delay) is all that one should ev

  • The analogy is a bit far-fetched.
    It sounds like an analogy looking for something to apply to.
    A predatory analogy, if you will.

  • Guys, the problems is not a lack of taxes (it rarely is), and the problem is not companies making opportunity out of asymmetrical information in the market which can't be explained to an average judge or stopped, and the problem is not prosecutors that even when winning a record judgement or settlement are still not deterring behavior, and the problem is not bureaucrats who are setting the laws to keep these games going.

    The problem is our markets (brokers, agents, order processing and the floor) are set up

    • The problem is our markets (brokers, agents, order processing and the floor) are set up in a way so that real investors are thrown to the wolves.

      That is different from the past how?

      Hint: Look up stock market trading practices during the roaring 20's.

      The stock markets are capitalism red in tooth and claw. There is far more regulation and control now than there has been historically. That plus the rise of the large mutual fund groups has (cf Vanguard. $2T AUM) have made it a reasonable place for long term individual investors at the same time it allows for rapid price discovery.

      Individuals who overcome the typical bad decision making process driven by

      • Of course, the suckers are the ones who watch TV, get scared, and trade constantly based on information they aren't sure about.

  • Robots? (Score:3, Funny)

    by Anonymous Coward on Thursday September 12, 2013 @09:23AM (#44829183)

    Robots? Really??

    So Robots physically stormed into the NY Stock Exchange and took over trading?

    Please, for the love of Terminator, please stopping calling programs "Robots"... "bots" are bad enough but can be overlooked but do not call them "Robots".

    • I don't know about you but I love it when my robotic spreadsheet adds up a column of numbers for me and then my robotic typesetter formats the results in my TPS reports.

  • Hopelessly Naive (Score:5, Insightful)

    by GlobalEcho (26240) on Thursday September 12, 2013 @09:29AM (#44829239)

    Consider the following quote from the paper

    Since both crashes and spikes are typically more than 30 standard deviations larger than the average price movement either side of an event (see Figs. 1A and 1B), they are unlikely to have arisen by chance

    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.

  • One criticism have about the content of the article is that the while the authors argue that the UEE's (the fast price spikes) aren't correlated with news events and can't be explained by random behavior, they don't really address another obvious source of UEEs: hedgers or speculators in the market who are liquidating a position as part of their **long term** needs or trading behavior. Ie- how do they know these aren't market orders (eg- Sell 100 APPL) placed by some guy day trading his brokerage account?

  • Just introduce a random delay between 1 and 5 minutes for every trade that takes place. Problem solved. You're welcome. :-P
    • by Firethorn (177587)

      At the rate HFT works at, 0-4 seconds would be more than enough, and allow random Joe blow to buy/sell stock without having to wait much more than the usual expected webpage load times.

  • "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

    So, the major market players are machines, and they're capable of bringing the system to its knees... The fastest machine gets you the most money for your investment. And then folks have the audacity to scoff at bitcoiners when the whole fucking world runs on a more broken version of the exact same shit.

    All of you monkeys are morons.

  • When a liar speaks.

"If you want to eat hippopatomus, you've got to pay the freight." -- attributed to an IBM guy, about why IBM software uses so much memory

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