hft; what are the facts?, page-6

Filmy, the problem with HFT is that it's evolving, and in fact, technically, by some it is construed as a misnomer.

Yes, the speed and frequency of trades does need to be controlled and electronically monitored live.

However, the truly frightening developments are taking place in the fields of artificial intelligence, advanced neural networks, and intelligent machines.

You will note that this year, the United States had it's first Non-Human company officially legally registered. The company is completely run by artificial intelligence, all decisions are made by advanced intelligent neural networks, all communications (both electronic and non-electronic ie. human/electronic interfaces) is made by machines.

Much of the advanced artificial intelligence work being done by universities in the USA, and the defence department, is highly classified.

These scientists however, and their research, are increasingly filtering into the finance and investment companies on Wall Street.

For instance, for the first time in it's history, only this year Goldman Sach's staff lists showed they now employ more computer programmers working on stock market trading algorithms, neural networks, and artificial intelligence systems, than stockbrokers and traders. The traders are being replaced.

I have attended at some of these universities, after conferences, and most people would not believe the advanced state of these research projects in relation to the stock market, and what is being hypothesized, built and tested. It truly is an Orwellian vision of the future, in which increasingly, all human decision making is being replaced by intelligent learning algorithms.

And it is here now. At it's basic level though, it turns any stock exchange into nothing more than a casino, with the machines simply stacking the odds, and controlling prices and percentages, without any recourse to the fundamental work done by a company, or the individuals in that company. Increasingly you will see things like, when a company makes a great discovery - their share price will go down, and vice versa, you will see more share price spikes on no news. The market becomes devoid of all fundamentals, and it loses all semblance of the meaning of why a market was created in the first place.

I posed these questions with 2 of my local members of parliament, federal and state. They both responded by saying there is nothing wrong with the markets or algorithmic trading, it is being done in the United States so it will be fine here in Australia. They both completely missed the important points, and neither had the slightest interest, because there is more votes in having their photo's taken with cute smiling babies in shopping centres on a busy Saturday morning.

Technically, the terminology High Frequency (or HFT), is but a side show, compared to what is coming.

Gw