Will robots rule the stock market? | with Alltime Conspiracies

– [Voiceover] Do automated algorithms control the stock market? You can turn back now, or learn the stuff they don't want you to know (Ominous electronic music) – [Voiceover] Here are the facts

The emergence of high frequency trading has fundamentally changed the nature of stock security and commodity markets Those iconic images of crowded trading floors and screaming brokers don't hold near as much weight in the modern day These so-called masters of the universe have been widely replaced by banks of humming computer servers performing high frequency trades with the potential to accrue millions of dollars within millionths of a second Just as Amazon spelled doom for thousands of brick-and-mortar bookstores, the rise of bot trading may end our current era of markets, marginalizing humans In fact, more and more academics, business leaders, and others are asking what if future markets don't need humans at all? Here's where it gets crazy

Human traders are already being replaced, according to Remco Lenterman, director of the Netherlands-based computerized trading firm, IMC In the past, the desks of equity traders would have between 80 and 100 human traders at an investment bank Today, there's maybe eight of them left What they do is operate algos that effectively are mimicking what traders used to do Human mathematicians, finance gurus, and programmers have created complex, automated methods of reading and attempting to predict the movement of a given market, with an emphasis on speed that simply cannot be matched by earlier techniques

This has already led to what Tom CW Lin calls, Cyborg Finance In his article, The New Investor, Lin argues that human thought and human deliberation have been replaced by computerized analysis and mathematical models, and that the main players of the finance industry are no longer entirely human While fears of unmanned drones and militarized darpa bots are more common, an AI-run stock market may be just as dangerous in the long-run, however, Lin does not see humans entirely banished from the world of finance

People, still, at this point, imagine and create the algorithms, verify data, and so on, not to mention that someone has to own the machines, own the software, and reap the profits A robot-run market isn't necessarily better for all players either Consider the flash crash of 2010, when around one trillion in market value vanished as a program from a Kansas mutual fund company sold 41 billion E-Mini SMP Futures contracts in about 20 minutes, triggering a flurry of staggering gains and losses that were largely recovered by the end of the trading day While experts still debate the particulars of the flash crash, the warning was clear, there could be consequences to the speed of this technology and competing programs could well destroy the market

One solution could, hypothetically, be more transparency between the processes of each program, however, the benefit of each program and each strategy is founded in secrecy, and high frequency firms rely on this secrecy to generate their profits For better or worse, these programs, their specifics, their strategy, and their sophistication remain the stuff they don't want you to know (Ominous electronic music) (Fast-paced electronic music)

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