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SOMETHING NEEDS TO BE DONE ABOUT THE HUMANS
This is what James Bridle (no relative) says in 'Rise of the Machines', from June 15 2018 Guardian:
High-Frequency Trading (HFT) algorithms, designed by former physics PhD students to take advantage of millisecond advantages, entered the market, and traders gave them names such as The Knife. These algorithms were capable of eking out fractions of a cent on every trade, and they could do it millions of times a day.
Something deeply weird is occurring within these massively accelerated, opaque markets. On 6 May 2010, the Dow Jones opened lower than the previous day, falling slowly over the next few hours in response to the debt crisis in Greece. But at 2.42pm, the index started to fall rapidly. In less than five minutes, more than 600 points were wiped off the market. At its lowest point, the index was nearly 1,000 points below the previous day’s average, a difference of almost 10% of its total value, and the biggest single-day fall in the market’s history. By 3.07pm, in just 25 minutes, it recovered almost all of those 600 points, in the largest and fastest swing ever.
In the chaos of those 25 minutes, 2bn shares, worth $56bn, changed hands. Even more worryingly, many orders were executed at what the Securities Exchange Commission called “irrational prices”: as low as a penny, or as high as $100,000. The event became known as the “flash crash”, and it is still being investigated and argued over years later.
Flash crashes are now a recognised feature of augmented markets, but are still poorly understood. In October 2016, algorithms reacted to negative news headlines about Brexit negotiations by sending the pound down 6% against the dollar in under two minutes, before recovering almost immediately. Knowing which particular headline, or which particular algorithm, caused the crash is next to impossible. When one haywire algorithm started placing and cancelling orders that ate up 4% of all traffic in US stocks in October 2012, one commentator was moved to comment wryly that “the motive of the algorithm is still unclear”.
This is what 'James' says in Something Needs To Be Done About The Humans (pub. summer 2017)
'... if we even superficially consider the significance of so-called HFT, or High Frequency Trading, it’s, quite frankly, terrifying. It’s like landing on another planet. Not the Planet of the Apes – that’s us…'
He waited for the laugh, but it didn’t come.
He ploughed on, 'it’s the Planet Of The Algos, the planet below 650 milliseconds where the algorithms live, and where they operate at speeds inconceivable to mere human beings, and, think of this, where they behave like living organisms, evolving through competition into a few stripped-down, optimized forms. All without human intervention or control.’
“... the motive of the algorithm is still unclear”
(from: 'Rise of the Machines', June 15 2018 Guardian)