Algorithmic Trading Rapidly Replacing Need For Humans 331
DMandPenfold writes "Algorithmic trading, also known as high frequency trading (HFT), is rapidly replacing human decision making, according to a UK government panel which warned that the right regulations need to be introduced to protect stock markets. Around one third of share trading in the UK is conducted by computers fulfilling commands based on complex algorithms, said the Foresight panel in a working paper published yesterday. Nevertheless, this proportion is significantly lower than in the U.S., where three-quarters of equity dealing is computer generated. The Foresight panel, led by Dame Clara Furse, the former chief executive of the London Stock Exchange, argued that there are both benefits and severe risks to algorithmic trading. There was 'no direct evidence' that the computer trading in itself increased volatility, it said, but in specific circumstances it was possible for a series of events with 'undesired interactions and outcomes' to occur and cause massive damage."
"Both benefits and severe risk" (Score:5, Funny)
Benefits: More money transferred to the very wealthiest individuals as traders who can't afford HFT servers (physically as close to the trading floor as possible - at these speeds, light is too damn slow) are at a severe disadvantage.
Severe risks: Potential for total economic collapse to take place in the blink of an eye.
I punch those numbers into my calculator and it makes a frownie face.