
Wall St. Computers Read and Trade on the News - J3L2404
http://www.nytimes.com/2010/12/23/business/23trading.html?src=twr
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pak
I appreciate that the Times calls this what it is: an _arms race_ , and it got
me wondering, has there ever been an arms race that has benefited humanity?

Competition over tangible consumer technology, I understand. An arms race
(what this is, because most would call finance markets a zero-sum game) I do
not understand.

This sort of algorithmic black-box HFT with uncontrolled news feed input is
like mutual assured destruction, all over again. What is it going to take to
give the financial industry a sense of responsibility?

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aristus
Well, there are nuances here. HFT may not be a net win for humanity, but it's
a long leap from there to "no arms race benefits humanity".

The last large "arms race" was a decades-long contest between the US and the
USSR. It resulted in millions of deaths (via proxy wars and famine), the near-
bankrupting of several contestants, and several cases where we almost turned
our civilization into glowing dust.

It also got us, as a species, to the Moon. It encouraged hundreds of thousands
more people to study engineering and hard sciences, created the interstate
highway system, modern communications, telemetry, trauma medicine,
epidemiology, etc.

I won't get into a discussion of whether all that was worth the cost, but it's
no coincidence that technology advances quickly during times of war and near-
war.

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msy
This really isn't news, Reuters et al have been selling tools like ClearForest
for years and lots of quant funds have their own tools.

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ndaiger
This reminds me of the recent New Yorker article debating the social value of
Wall St.:

[http://www.newyorker.com/reporting/2010/11/29/101129fa_fact_...](http://www.newyorker.com/reporting/2010/11/29/101129fa_fact_cassidy)

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blhack
Isn't this what caused a tizzy in the markets a few months ago?

Some news article came out that trigged some of the algos to sell...then the
other algos started seeing this and selling...then the news reports started
flowing in about something weird going on...the algos thought the sky was
falling and started freaking out until somebody hit the scram button?

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MrFoof
Ultimately what caused the tizzy in the markets was the mid-office of
financial institutions not being rigorous enough. Not enough backtesting.
Inadequate modeling. Weak correlations.

Analyzing news, per se, isn't an issue. There are already plenty of data
brokers that provide this information (i.e. Thomson Reuters' Guidance,
Significant Developments, and many more). Decreasing the latency also isn't an
issue. Models that enter runaway states are the issue. Quantitative finance is
about rigor -- eliminate the rigor and it's advantages over qualitative
strategies are all but gone.

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iwwr
Can we get a link without the sign-in?

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snissn
you can google the headline

~~~
iwwr
Googling the headline gives me a link with the same sign-in barrier.

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j2d2j2d2
This has been done for a LONG time...

~~~
_delirium
Yeah, you can find mentions of this sort of thing as a standard motivating
application for information-extraction/sentiment-analysis/etc. NLP systems
dating back to the 1980s. The 80s academic papers I've read do mostly propose
it as a semi-automated thing: extract a bunch of information and present it to
a human trader, i.e. function as a decision-support system. Not sure when it
was first plugged into a closed loop that directly traded on the analysis
without human intervention (it's possible it's not publicly known who first
did that, since hedge funds tend not to announce such things).

~~~
ig1
Generally that's true of most algo/AI stuff, initially it goes in as human
advisory and then gets switched over to automatic once people trust it.

~~~
gcb
^H^H^H^H^H^once the volume compensate the bad decisions.

there. fixed it for you.

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goldenthunder
this is exploitable both ways. humans will always be able to outsmart
themselves.

