Rise of the Machines: How computers took over the stock market

"However, these greedy, panicky fuckwits affect *my* life"

Except not. The Parliamentary report into the '08 crash is out -- and hardly a whitewash, since Parliament have been at the front of the queue to complain about evil gambling investment bankers -- and they've concluded that Northern Rock went bust by lending too much money, mainly mortgages, to people who couldn't afford to pay it back, HBOS went bust by lending too much money, mainly mortgages, to people who couldn't afford to pay it back, and RBS went bust by paying too much for ABN Amro and lending too much money, mainly mortgages, to people who couldn't afford to pay it back. It was a retail bank fuck-up; not an investment bank fuck-up. HFT, complex derivatives, naked short selling, and credit default swaps had nowt to do with it -- and this is coming from the people who assured us that the problem was entirely caused by HFT, complex derivatives, naked short selling, and credit default swaps.

Is there a benefit?

This really isn't my area of expertise so I hope someone on the Reg can help me become better informed - is there any benefit to all this rapid trading? It seems to me that only the winning participants benefit and that there's no way for me to reliably predict who they will be.

So would I care if, say, each traded entity had a price set daily at which trades could be made and which did not change until the next day?

Re: Fascinating article

"and do you think there is no a correlation that and financial instruments that no one has any control?"

Please, inflation and house prices have everything to do with the Government - do you honestly believe that if they didn't want the price pumping to occur that they couldn't have stopped it? House prices are pumped by the Government for two reasons - taxation, and wealth affect. Housing is the one area where tax is near impossible to avoid. Stamp duty on transfer, council tax on value, and debt slavery for good measure to keep you under control. The wealth effect is just there to convince you you've all got more money in the pot whilst you are systematically getting shafted by the wealth destruction that is inflation. A little sugar coating if you will. Ever notice how the only people with consistently inflation busting pay rises and pensions are politicians? Sure they'll slow it down for a year or two (and suckle harder on the expenses teat to compensate) to keep the voters appeased but they'll always be well ahead of the curve. Public sector wage inflation during the same period was vote buying by Labour as they pissed the country's wealth away. Benefits rose mightily as well to buy a few more votes. Notice the uproar when you try and lower public sector pay or benefits despite the private sector being hammered? Sense of entitlement anyone?

You can ride along on the banker bandwagon with all the other general public suckers that believe the political spin of "it's all the nasty banker's fault" if you like but I prefer not to live in ignorance. The people in the limelight before the financial world imploded were the expense cheating leeches in the corridors of power. The people that pissed away the money in the good times so that we now have a structural deficit in the bad. You might want to ask yourself whose responsibility it was to regulate your favourite bogeyman? Didn't occur to you that what was happening was fine and dandy by them until it went boom?

Take away every single penny of the nasty bankers debt and the UK still has a massive structural deficit. Know what that means? I'll spell it out for you - we're spending way more than we have, every bloody year. Get rid of the city (err, and the billions in taxes generated incidently), manufacture your heart out all you like but the UK cannot afford the payments it is making whether that be for middle eastern wars, benefits, or the NHS.

Get used to it because the country is long-term f*cked.

Re: Fascinating article

> The thing that annoys people outside the financial industry is that all the effort only ends up transferring money from one place to another. It does not produce wealth only redistributes it among those who don't really need it.

Yes, this does annoy people. It's not actually true, but it does annoy people.

Every day, the benefits of an efficient market are reflected in the price and availability of everything you buy. It's often quite difficult to explain the link between exchange trading and how well stocked your local supermarket is and why the country never runs out of eggs or lightbulbs, which is why so many people are unaware of its existence, but the link is there. Look at countries that aren't properly involved in exchange trading. Compare the difficulties faced by their populations with ours.

The pricing mechanism creates optimal prices, which in turn maximise trade. By exploiting market discrepancies, arbitrage removes those market discrepancies, giving us more optimal prices sooner. HFT, by speeding up arbitrage, gives us optimal prices even more quickly. The more optimal the prices, the more efficient the entire system by which we produce goods, move them around, and sell them to people who want them. What would happen if some disaster led to the wholesale destruction of the crop of every farmer in Britain? Famine? Of course not. We're lucky enough now to live in a part of the world where such an outcome is unthinkable. And why would the destruction of our food supply not lead to a food shortage? Efficient trade.

If you think trading produces no wealth, ask yourself how these shiny new buildings which are constantly going up in the City are being paid for. It is simply not possible to carry out projects like that on the back of moving some money back and forth: you have to create wealth to spend that much of it.

Sure, crashes happen, but the thing to bear in mind is that the population became generally wealthier from 2000 to 2013, regardless of 2008 and 2010. Indeed, we've had scores of terrible crashes over the last hundred years, yet we still live in a far wealthier world than existed a hundred years ago. The crashes are blips, but the overall net progress of the system is still good.

Re: Taxes aren't a solution, they're a way to compound a problem.

All right, but apart from the sanitation, medicine, education, wine, public order, irrigation, roads, the fresh water system and public health, what have the Romans ever done for us?

Re: @SysLoll - Radical solutions needed @AC 18:27

Please don't feed the libertarian. He'll come back and tell you that law and order isn't actually needed, it can all be dealt with as civil law, with paid-for services. He'll also say that, again, you can pay for the best contract for you for fire (remember the first fire-services (in the UK) were provided by insurance companies, and if you didn't have the right badge on your house, the firemen would let it burn to the ground). The military, equally (the libertarian will say) was run on the basis of mercenaries for far longer than the standing-army system, and that it prevented wars (though a look at the history of Europe between, say, 800 and 1800 proves what bollocks that is).

in the anti-tax libertarian (actually, anarchist) point of view, there is no such thing as a free lunch, and taxation is all a way to keep the weak poor living off the deserving rich , and ... oh, I can't be bothered any more. For an idea of how such a system might work (if you have money), have a look at Heinlein's "The Moon is a Harsh Mistress"