2011/12/20: the amount of electricity that goes to HFT activity is not only not presently a problem, but it has a very long way to go before it’s cause for concern. But my point is that, unlike other types of energy use, which have natural limits and constraints, and which deliver actual goods and services as an end product, there seems to be nothing stopping HFT from becoming a problem at some future date. There is no theoretical cap on the number of participants in the stock market, and there’s no theoretical cap on the number of trades per second that those participants can generate, and, thanks to derivatives, there’s no theoretical cap on the notional amount of money that market participants can shuffle around among themselves. So, again, the amount of power that goes into HFT activity can and will grow, and nothing can stop it.
2015/05/14: If a fraudster puts out a ridiculously deceptive piece of information and nobody falls for it, is it still fraud?
Probably yes, but today’s attempted manipulation of Avon’s stock price by somebody who slipped a false takeover offer on the Securities and Exchange Commission’s EDGAR system raises the question of whether anybody – any human, that is – could have been dumb enough to believe it. Maybe that's the point: It was designed to fool word-scanning, dumb computer trading systems.
This was a fraud designed for algorithmic traders. It was not designed to fool anybody who’d actually read it. It was designed to fool some system that scans SEC filings for certain words but doesn’t actually read them.
2018/07/22: Of the world’s 100 largest economies, 69 are transnational businesses. How can we control—and ultimately transform them?
Changes in our personal consumption patterns are important, but are ultimately inconsequential compared with the impact of the transnationals that have come to dominate our global economic and political system.
countries and cities compete with each other to beg their corporate overlords for investment dollars, even it means undermining public services and legal protections for their own populations.
Tax stock trades based on the length of the holding period:
- 10% if the stock is held less than a day
- 5% if less than a year
- 3% if less than 10 years
- 1% if less than 20 years
- Zero if more than 20 years
The effects of this single step would be enormous. The financial services industry would be transformed overnight. High frequency stock trading and same-day traders would disappear.
The market is always “just one step away from massive volatility because of programmed trading,”
I was recently interviewed by FHM Magazine about, surprise surprise, Bitcoin, Blockchains, and cryptocurrencies. We were halfway through the discussion when I was asked a question about the
Without it you can't make a phone call, buy a stock, pull cash from an ATM, or use electricity.
Has anyone spanned the Atlantic with floating microwave masts yet? We're not sure...
2015/04/20: A Web-reading bot made millions on the options market. It also ate this guy’s lunch.
On the afternoon of Friday, March 27, as several news outlets reported at the time, somebody apparently made $2.4 million from a tweet. That tweet was a bit of breaking news from Wall Street Journal writer Dana Mattioli:
Intel is in talks to buy Altera. Deal would be largest in Intel's history. Scoop w/ @danacimilluca coming to http://t.co/Q7kOQBB8Zh
— Dana Mattioli (@DanaMattioli) March 27, 2015
Quicker than any human seemingly could have done it, someone—or rather something—bought $110,530 worth of cheap options on Altera, a company that makes digital circuits.* Over the next several minutes and until the end of the day, as humans digested Mattioli’s takeover rumor at human speed, Altera’s stock price rose. When all was said and done, those cheap options had resulted in a $2.4 million profit. Speculation immediately centered on the idea that an automated program (a “bot”) had scanned the tweet, interpreted its meaning, and instantly bought those options based on an algorithm. The robot had read the tweet and made a killing on it before anyone knew what was going on.
On April 6, a Reuters report disproved the initial hypothesis. In fact, Reuters reported, the trade occurred 19 seconds before the tweet, and one second after a headline appeared on the Dow Jones Newswire.
I know a guy—a human guy—who was on the other side of that trade. And he says this wasn’t the first time it happened to him. He’s convinced someone’s figured out an algorithm that’s faster than anything he’s ever seen before. So fast, he fears, that it might eventually put him out of a job.
AI computers will benefit humanity - and fears that they might determine that the planet would prosper without us are unfounded. But machines needn't be self-aware to pose a threat
The importance of algorithms in our lives today cannot be overstated. They are used virtually everywhere, from financial institutions to dating sites. But some algorithms shape and control our world more than others - and these ten are the most significant.
2014-05-14: NYSE, again in coordination with every other exchange, has "limit up/limit down" rules designed to prevent exactly these trades from happening. So the NYSE rules say that stocks can't trade more than 10 percent away from their reference price (the average price over the previous five minutes): Those trades just aren't allowed. 5
Except! In the first 15 and last 25 minutes of trading, the limit up/limit down bands are doubled, to 20 percent, because those tend to be more volatile and higher-volume times and you want to restrict trading less. The "clearly erroneous trade" rules, on the other hand, don't adjust for the last 25 minutes. If someone had fat-fingered AOL at 3:30, trades below $33.17 would never have happened, so they'd never have to be broken. But they fat-fingered it at 3:49:41, so the stock could go down as far as $29.48 before the circuit breakers kicked in. 6 But any trades below $33.17 could be broken after the fact.
That is just self-evidently dumb: If you're going to allow some trades and not others, and you have the technology to prevent the bad trades before they happen, and you use that technology to prevent some bad trades before they happen, it seems very silly to just let other bad trades happen, and then break them up after the fact. (Or, put another way: Trades not prevented by the technology are not actually bad, and should not be broken after the fact.)
One possible lesson here -- beyond "hey the exchanges should change the rules to fix this silly problem" -- is that they should change the rules carefully.
I guasti dell'economia globale nell'ultimo libro di Federico Rampini. Le cure escogitate per contrastare la grande recessione hanno provocato distorsioni e
2012/09/20: Industry pros-who reported out-of-control computer algorithms and an emphasis on speed over safety-actually wish high frequency trading was more regulated, a new study says.
"With the chance of an order passing though controls at so many levels, how can things go wrong?" Clark asked in her analysis. "One possibility Chicago Fed researchers found is that most of the trading firms interviewed that build their own trading systems apply fewer pre-trade checks to some trading strategies than others. Trading firms explained that they do this in order to reduce latency."
Latency is the time it takes to place an order to an exchange and have it confirmed. Making that process go as quickly as possible is at the heart of HFT.
The firms develop algorithms to speed the trades, but survey respondents reported the "algos," as they are more commonly referred, can run amok.
To address malfunctions, some firms said they fix bad algos simply by "tweaking old code" and putting new algos back into production "in a matter of minutes." One firm, though, said it had an out-of-control algo caused by a software bug inserted when it tried to fix an initial bad algo.