Algorithms Take Control of Wall Street

[JBeukema]

Lexicon has helped automate the process of reading the news, drawing insight from it, and using that information to buy or sell a stock. The machines aren’t there just to crunch numbers anymore; they’re now making the decisions.

That increasingly describes the entire financial system. Over the past decade, algorithmic trading has overtaken the industry. From the single desk of a startup hedge fund to the gilded halls of Goldman Sachs, computer code is now responsible for most of the activity on Wall Street. (By some estimates, computer-aided high-frequency trading now accounts for about 70 percent of total trade volume.) Increasingly, the market’s ups and downs are determined not by traders competing to see who has the best information or sharpest business mind but by algorithms feverishly scanning for faint signals of potential profit.
At its best, this system represents an efficient and intelligent capital allocation machine, a market ruled by precision and mathematics rather than emotion and fallible judgment. But at its worst, it is an inscrutable and uncontrollable feedback loop. Individually, these algorithms may be easy to control but when they interact they can create unexpected behaviors—a conversation that can overwhelm the system it was built to navigate. On May 6, 2010, the Dow Jones Industrial Average inexplicably experienced a series of drops that came to be known as the flash crash, at one point shedding some 573 points in five minutes. Less than five months later, Progress Energy, a North Carolina utility, watched helplessly as its share price fell 90 percent. Also in late September, Apple shares dropped nearly 4 percent in just 30 seconds, before recovering a few minutes later.

Algorithms Take Control of Wall Street | Magazine

 

[elvis]

I'm reminded of 2001: A space odyssey.

 

[Trajan]

SkyNet.

 

[Toro]

The Machines have been in control of Wall Street for awhile.

High-frequency trading - Wikipedia, the free encyclopedia

 

[uscitizen]

And most of our programming has been outsourced to India. hmmm

 

[Sallow]

India, China, Brazil, Malaysia, Manila...heck..pick a place that's a third world backwater with decent education..

 

[william the wie]

Making the world safe for long-range fundamental investing, works for me.

 

[Toro]

And most of our programming has been outsourced to India. hmmm

Trust me. Those programs haven't been outsourced.

 

[william the wie]

And most of our programming has been outsourced to India. hmmm

Trust me. Those programs haven't been outsourced.

LMAO! Here set up my money winning strategy but don't use it to undercut me. The mental picture of an "eat what you kill" purist doing that got me giggling like a six year old.