Flash Crash, Dark Pools, Artificial Intelligence,
Algorhythms, and People
Some people play the numbers, others the horses or buy lottery tickets. I once played the stock market, although not seriously because I didn’t have enough money. Still, it was fun watching NY Bancorp rise, split, rise, split, rise, split again until I’d made enough to feel pretty smart. Then I bought Geron, a strange little company trying to learn the molecular secrets of immortality. It rose. I sold. It fell. I bought again. It rose, I sold. Wow! I was smart! I bought WorldCom, which rose. After I sold at a profit it was exposed as a fraud and collapsed. I was lucky, not smart. After the Bush financial debacle, I bought Ford and GM. Ford rose, GM vanished. One more crack at Geron. It tanked. Ford up, all else down. Not so smart. Then came the Flash Crash, 1000 points down and up again in minutes.
Suddenly people were talking about Quants, young math hotshots working for mysterious billionaires who had money stashed away in “dark pools.” Quants devise algorhythms for computers with Artificial Intelligence to do lightning fast trades. The Flash Crash happened when these computers tangled, sending the stock market, which is also computerized, off a cliff. I’m still smart enough to realize that things have fundamentally changed. For mere mortals, the Stock Market is no longer a market.
According to Scott Patterson, in his new book, Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System, no one even knows what’s going on in this “market,” much less how to regulate it. From now on, as a lowly human being, I’ll confine my buying to local supermarkets with occasional trips to a farmers’ market for beets and tomatoes grown 50 miles away.
Algorhythms, and People
Some people play the numbers, others the horses or buy lottery tickets. I once played the stock market, although not seriously because I didn’t have enough money. Still, it was fun watching NY Bancorp rise, split, rise, split, rise, split again until I’d made enough to feel pretty smart. Then I bought Geron, a strange little company trying to learn the molecular secrets of immortality. It rose. I sold. It fell. I bought again. It rose, I sold. Wow! I was smart! I bought WorldCom, which rose. After I sold at a profit it was exposed as a fraud and collapsed. I was lucky, not smart. After the Bush financial debacle, I bought Ford and GM. Ford rose, GM vanished. One more crack at Geron. It tanked. Ford up, all else down. Not so smart. Then came the Flash Crash, 1000 points down and up again in minutes.
Suddenly people were talking about Quants, young math hotshots working for mysterious billionaires who had money stashed away in “dark pools.” Quants devise algorhythms for computers with Artificial Intelligence to do lightning fast trades. The Flash Crash happened when these computers tangled, sending the stock market, which is also computerized, off a cliff. I’m still smart enough to realize that things have fundamentally changed. For mere mortals, the Stock Market is no longer a market.
According to Scott Patterson, in his new book, Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System, no one even knows what’s going on in this “market,” much less how to regulate it. From now on, as a lowly human being, I’ll confine my buying to local supermarkets with occasional trips to a farmers’ market for beets and tomatoes grown 50 miles away.
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