Friday, May 14, 2010

CAN MARKET BE MANIPULATED?

From Zerohedge.com Isn't it invasion of the black boxes?
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5 comments:

Anonymous said...

I disagree with this author. I can approach the market from his angle as well as 32 years in the software development business and 10 years in a MF/Brokerage company.

He would be amazed at what can be done with high speed computers and software. Now combine that knowledge with market maker information especially for big block trades and the ability to skim at 100% accuracy is reality.

The ability to move the market is also a reality whether on purpose or by accident. Computers dueling against each other can cause events that could be difficult to foresee if back testing those events has not been done properly.

GS, JPM and others had NO losing trades for months on end. This is not the work of Timmy as suggested by the author.

3:56 PM
Marc R said...

You have ton of experience, intelligent post. I hadn't had chance to read that article before I posted it. Not everything I link do I agree with, but for discussion purposes....popular topic.

Black boxes and their engineers even if Harvard grads will find best laid algorythm can go wrong.

I smell change in wind, bear wants back in, we have serious correction on tap here, will be looking for other signs that it may be more. Some of my reliable subs seem to think fat lady has not sang

7:25 AM
Anonymous said...

"Black boxes and their engineers even if Harvard grads will find best laid algorythm can go wrong."

Yes - that is the point I was making. As High Frequency Trading becomes more prevalent the risk of unforseen events not programmed and tested into the software will occur, leaving the software developers to look at each other and say whoops we did not plan for that condition.

Market place conditions have millions of variables that simultanously occur. Now extrapolate those conditions across multiple HFT systems which are proprietary and built by different firms and have never been tested against each other to generate trading schemes.

The outcome is that a whole new set of variables and events are introduced into the mix.

Wide swings in prices, increased volatility and bizarre bid/ask prices wil be the result.

The author of the article you referenced is not totally incorrect he just does not include the results of let's say 10 HFT systems operating on the market at one time.

By the way - what is called Genetic Programming is now making it's way into computer programming trading systems. You are hearing about High Frequency Trading now. In the coming years you will be hearing about GP with words such as crossover and mutation - very similar to Bio-Tech DNA work.

9:15 AM
D said...

This "mysterious" event will give the politicians something to do. Those who rule are not in the grasp of the situation.

I have seen suggested 50-60% comes from HFT.
I don't see much good coming from that.

12:53 PM
Anonymous said...

The system has been exploited and corrupted by the few at the expense of many.

3:46 PM

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