The stock market is run by wild robots we don’t fully control – Most stock market trades are made by...

The stock market is run by wild robots we don’t fully control – Most stock market trades are made by algorithms, not humans, and they’ve already caused crashes. We need to understand their group behaviour to avoid disaster

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  • I thought this was one of the reasons we had market “circuit breakers” in place to halt trading when a selling trend started feeding onto itself?

  • How about screen-grabbing the story and posting it? It’s blocked for me on that site after the first couple of paragraphs.

  • I thought that most of the major market crashes in the recent years were triggered by human greed and human decisions with the effects only being amplified due to rule based systems on trading algos?

    I don’t think they’re anything near wild robots that is claimed here. More like a one trick pony in most cases.

  • There will be a lot of AI bots trading. All will have their own unique programs and logic to win the stock market game. Different companies will have different AI bots, large and small. Investors will see their winning and losing strategies and they will invest accordingly knocking some out of the game.

    Before soon there will only be a 20 AI bots.

    Then 10 AI bots.

    Then 4 AI bots.

    Then 2 AI bots.

    Then 1 AI bot.

    Can there be a market with 1 AI trading?

  • If the stock market is using those early 90’s computers in the picture, then I’m beyond impressed.

  • Not correct. It’s actually much worse.

    Look at the crash that led to the Great Recession. The large financial companies have massive positions in derivatives. These are tied geometrically to the value of the underlying assets. This means that when the asset goes up or down a dollar, the derivatives may go $10, or $100, or $1000.

    The major financial players are essentially running a giant casino with little or no relationship to investing money in assets that have real value, like factories, roads, or houses. This tends to happen when large empires lose their way, and don’t know how to generate real wealth anymore.

    It doesn’t have to be this way. We can re-orient our economy to the real economy of the future (high speed rail, medical innovation, space exploration and asteroid mining), but the policymakers have to decide if this is the way they want to go.

  • I keep waiting for the next drop to get back in. But it never happens. WTF?

  • I think the real shocker of that story is New Scientist charging $50 a month for we access

  • Or we get rid of the bots and require humans do the trading…. radical right?

  • It could be a naive point of view but for me robots should be banned from markets.

  • Why don’t we stop the robots from trading and make it a human activity again? It’s not about investing in sound companies anymore, it’s micro profits times a million trades per second and no one can predict the trends except these computers that create them.

  • Great. Can we delay all transactions by a random 1/2 to 1/4 second? Plus tax penny tax on all trades. This would eliminate timing and volume based arbitrage. Automated micro transactions are out of hand.

  • Human traders have perfectly understood group behavior and never cause crashes.

  • 0.01% tax on all trades. Use it to directly fund physical education in the country.

  • The machines rising up to destroy humanity seems a lot more “Wolf of Wall Street” than “The Terminator” than we were expecting. But for reals, I spent some time researching HFC(high frequency trading) systems in undergrad and they are FASCINATING. Not just the algorithms themselves but how they get optimized in insane ways, like moving them physically closer to an exchange to reduce transmission delay

    But really, we’re like one or two screwups from collapsing entire economies

  • Are they talking about AI, or the humans employed there? 😉

  • Robots caused crashes ROFL as if humans didn’t cause crashes with their irrational buying of tulips. It’s nothing more than price discovery.

  • This is not even 0.1% of the reasons for stock market crashes.

  • For a second I thought I was reading something from that story starter subreddit.

  • Only fucking idiots endorse our pyramid scheme of greed.

  • how is this not obvious I mean day trades binary trades can even be implemented into this category but it’s not like they don’t have safety precautions I mean come on people.

  • There’s algorithmic trading, high frequency trading, dark pool trading and various other versions of this, some assisting humans and acting in reasonable time frames, others – HFT – hammering away for tiny margins where milliseconds count.

    It’s quite an interesting virtual experience, to sit in Berkeley Square (around which many hedge funds have their offices) and imagine the trillions flashing around through high speed trading. A special tunnel was cut from Chicago to NYC to knock a few milliseconds off the information delivery time to aid HST. Nevertheless, nobody makes much money from all of this, but they do charge their clients for the privilege of having their assets churned. Allegedly, markets are made more efficient by having this background lubrication running.

    This is not new. Chase had systems tracking and arbitraging against rival systems back in the 1980s. Barclay’s started to use neural nets in the 1990s, and although long superseded, the successor systems are [reviewed here]( Every other bank has similar. [Paribas]( advertise fourth generation systems (“algos”) for FX trading. You can buy MetaTrader, NinjaTrader, IQBroker, and Quantopian off the shelf. My neighbours in the country run one fo these out of converted pig sheds.

    Could all of this lead to disaster? To date, it has generated several significant glitches – LTCM being the most important – but these were due primarily to conceptual errors not to trading systems per se. Much the same could be said of the bundled risk instruments that played a role in the 2007/8 unpleasantness: CDOs of themselves hurt nobody, but poor risk accounting most certainly did do so. Trading is a vehicle, and whilst it can be driven into a wall, it’s not intrinsically dangerous. What was far more worrying in the 1990s was the billions at the fingertips of coked up twenty year olds who operated with the minimum of oversight or supervision. Barings, Leeson, say no more.

  • We’re already living in the singularity wake up sheeple

  • We’re talking about Skynet, drones and automation when there is a swarm of competitive AIs trying to get profit out of time and good choices from what determines everything about Mankind today: the Market. Funny fact.

  • No no no!

    You need to keep applauding AI and all it entails…

    …let these poor misunderstood bots do their thing.

    It’ll all be okay.

  • We likely will learn the hard way when some ridiculous crash occurs. It’s worth noting though that we are in the longest stable run of the stock market ever with sector rotation as efficient as we have ever seen. Too good, it makes me nervous.

  • At this point it should be fairly obvious that the problem isn’t humans or robots… but market systems themselves.

    If you have an economic system that lacks planning no shit you’re going to experience crashes, it’s anarchy by design. This computing power should be put into use for a planned economy.

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