[This message was posted by Jim Northey of The LaSalle Technology Group <j...@lasalletech.com> to the "Algorithmic Trading" discussion forum at http://fixprotocol.org/discuss/31. You can reply to it on-line at http://fixprotocol.org/discuss/read/cf21817f - PLEASE DO NOT REPLY BY MAIL.]
Not to all the above. But when I looked at that stock chart from May 6th going into the next trading day - I thought where have I seen such a pattern before? Then I thought - yes - non-linear dynamics. Things are so complex and inter-related and all driven off of the same set of spurious signals with multiple levels of feedback loops that we have have created this incredibly system that is now exhibiting chaotic behaviors. Algos are just a part - HF, multiple venues. It is just an incredibly complex system. Maybe the SEC should surveil the system with software designed to track and monitor earthquakes and heart attacks. And John - nice to hear you chime in - The Romans have lead poisoning to blame for their decline - what is our equivalent? High fructose corn syrup and Facebook? :) My two cents (before discounting) we have some good thoughts and observations on this thread and we do need to follow larger industry trends and begin to analyse the masses of trading data to understand the overall system behavior. Someone said it best forget where I heard it within the last two days, maybe the SEC should lay off a few dozen lawyers and hire some tech savvy people that understand complex system behavior. Heck with the calvary - call in the Santa Fe Institute! > Did algorithms lie about the market value of assets on the balance > sheets of big banks? > > Did algorithms create the "too big to fail doctrine" and saddle future > generations of children, some not yet born, with debts they didn't incur > and can never repay? > > Did algorithms create fiat currencies or lever equity 100 fold? > > Did algorithms mandate the payout of 50% of bank revenues to people > other than shareholders? > > Did algorithms create the absurd, childish notion of a "national market > system" or approve bank holding company applications of Goldman Sachs > and Morgan Stanley in two days, over a weekend? > > Did algorithms assign Aaa/AAA credit ratings to third derivatives of > pools of stated-income loans? > > Did algorithms put the the full faith and credit of the people of the > United States behind the liabilities of GE Capital, American Express, > and a host of other fascist companies that have been allowed by corrupt > politicians to make one-way bets on the backs of present and futures > generations of taxpayers? > > Might it just be that all of us who love our families and children, > who understand the economic importance of competition and free > markets, have better objects of concern at the present moment than > algorithmic trading? > > Sheesh. > > I guess the Romans proved that bread and circuses really do work. > > > > > Considering the sheer volume of trades/orders generated by algos a > > tool to monitor what is going on will be necessary. It can't be done > > by humans or who would bare the cost? I believe its the lack of tools > > and the evolution of this type of trading that is way ahead of the > > ability to monitor what these algos are doing. They are unpoliced and > > probably will be for sometime. > > > > > Indeed, in my point of view > > > > > > The algorithms must not be controlled by algorithms, but the market > > > monitoring or risk management that should be a completely > > > independent infrastructure. > > > > > > > > > Regards > > > > > > Jaime Romanini > > > > > > > > > > > > > It's an interesting, and reasonable, question, but it doesn't make > > > > sense to position this as a problem with the experience level of > > > > the users of the algorithms - it seems to me that this is more a > > > > question of needing better risk management capabilities on the > > > > side of the systems that are interacting with the algorithms. > > > > > > > > > May 7, 2010 Katherine Heires @ securitiesindustry.com > > > > > > > > > > While trading algorithms are regularly praised for their speed > > > > > and efficiency, a growing contingent of professional traders, > > > > > financial engineers, consultants and academics say they are > > > > > being misused, or are faulty from the start. Their answer? > > > > > Establish best practices and increase training to keep > > > > > algorithms from doing more damage than good. > > > > > > > > > > The impetus for the movement is the fear that the availability > > > > > of sophisticated trading strategies to a wider audience with > > > > > varying levels of expertise could cause havoc in the markets-- > > > > > and already has, in the view of many.(...) [You can unsubscribe from this discussion group by sending a message to mailto:unsubscribe+100932...@fixprotocol.org] -- You received this message because you are subscribed to the Google Groups "Financial Information eXchange" group. To post to this group, send email to fix-proto...@googlegroups.com. To unsubscribe from this group, send email to fix-protocol+unsubscr...@googlegroups.com. For more options, visit this group at http://groups.google.com/group/fix-protocol?hl=en.
