Hello there!
My name is Alec Powell and I'm a freshman at Stanford University. I'm taking a IntroSeminar called Computers and the Open Society, and this is my blog for the class.
In today's market, every trade is made by a computer. You can put in an order on online broker websites. From there, the trade goes through to more computers, and magically it is processed. What is the process for this? How are trades actually made if they happen every millisecond? What happens if a computer's trading algorithm glitches or crashes? How is the market affected by all of the computers running the show? Are there governmental regulations to this?
Throughout the quarter, I'll be researching and blogging about computers and the stock market to try and answer some of these questions. I'm interested in studying both Computer Science and Economics, so this topic is perfect for me because it is a smooth blend of both fields.
Just a few decades ago, when there were no computers, the stock market trading floor was cluttered with traders holding ticker tape. These days, it's cluttered with computers making digital transactions. I'm interested in how this process came to be, and what implications this has on the stock market of today and tomorrow.
I'd also love to hear what you think about this topic. If you have any suggestions, I'd love a comment from you!
I believe I've seen a statistic that over half of trading on Wall St. is now high frequency trading. There is a point at which too much trading is done by computers in what is essentially gambling on the other algorithms being inferior. Is Wall Street the venue for gambling? It is my understanding that belongs in Las Vegas.
ReplyDeleteNice intro, and particularly pertinent with regard to recent bugs (ie, http://www.theregister.co.uk/2012/08/02/knight_capital_trading_bug/) and other instances of financial instability.
ReplyDelete