Sunday, November 6, 2016

They talk to each other today

Why is the academic research liking the bots more today than yesterday? Because today we have enough bots spread over the asset classes so that network queueing is stable.  

We are seeing, everywhere, the bots interact by mistake, almost.  They simply end up thinking by keeping their interacting queues from overflowing the caches.   It is maximum entropy.  Whatever your theory of the  market or economy, there is a sufficient map of your theory in the set of queue variances along the net.

The queues bunch up at the exchanges, competition here means relative free entry and exit for pit bosses.  The issue is how long before the technology breaks the barrier, we start trading without calling Janet.  On that day, kiss the exchanges good by.

There is a fractal property to the famous call to Janet, due to segmentation we can model it as a common factor effecting trading rates down the chain.  You get aggregating, when one exchange can make the long distance call on behalf of thousands of traders.  It is the job of the currency banker to advance the technology, and stop this aggregation.
Bloomberg: Across the wider world, Wall Street’s speed demons are all too often cast as the villainsof the stock market.
As computerized trading firms have become the dominant buyers and sellers of equities, they’ve been blamed for exploiting investors and causing bouts of extreme volatility, and were famously portrayed by Michael Lewis as part of a rigged system in “Flash Boys.” The Bundesbank said they can help trigger flash crashes and Hillary Clinton made policing them an election issue.
But in academic circles at least, high-frequency traders are more often treated like heroes.
Since 2013, positive research has outnumbered negative by a 2-1 margin, a database search of the 30 most-cited papers on HFTs showed. Researchers found automated firms reduced trading costs, and contrary to popular opinion, improved market depth and stability. It’s a turnaround from the previous three years, when most studies were inconclusive or negative. The results were compiled with Microsoft’s search engine for academic research.
“As a whole, the literature strongly supports HFTs being a net positive,” said Jonathan Brogaard, a professor at the University of Washington and co-author of “High-Frequency Trading and Price Discovery,” which has been mentioned by other researchers more than 350 times as the most-cited paper.

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