Knowledge is NOT power… (or: 知識は力ではありません) :)


Taro Aso said that bankers in Japan had not been able to understand the complex financial instruments that were the undoing of major global players in the 2008 crisis, so had not bought them.

“Many people fell prey to the dubious products, or so-called subprime loans. Japanese banks were not so much attracted to these products, compared with European banks”, Mr Aso told a seminar in Tokyo.

“Managers of Japanese banks hardly understood English, that’s why they didn’t buy”, he said. [1] (!!!)

Who said knowledge is power?

In this case, LACK OF KNOWLEDGE proved life saving! 😛

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High Frequency Trading, computers, humans…


In markets, as in war and medical research and just about everything else, technology tends to impart an advantage.

This is how a single computer program of mysterious origins managed to make up 4 percent of all quote traffic in the U.S. stock market last week while hoarding 10 percent of the bandwidth allowed for trading on any given day.

That’s scary. No one knows where the program came from, what it’s really doing, or why it failed to actually execute a single trade–though there are plenty of theories. None of which is comforting. [1]

Something to think about as the millisecond tick by today: How computers have taken control of our financial world.

This is largely the result of high frequency trading, or HFT, in which computer algorithms are constantly trying to find small price discrepancies for the same stock on different exchanges, which are caused by the fact that so much trading is happening so quickly that each exchange can’t always keep up with the rapidly changing price of any security. If an algorithm can spot a millisecond-level opportunity in which a stock is–for the blink of an eye–worth more on one exchange than another, it can make a quick buck (this is called abitrage, and it’s how HFT turns a profit). [2]

So the underlying value of the stock doesn’t matter – HFT generally just exploits pricing opportunity, and in turn the high volume of trading it produces helps to further create delays in the connections between exchanges, which helps create even more opportunities for abitrage.

Unfair. Illogical.

It can only be human.

Or… computer?

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