The Economist.
Link:
http://proquest.umi.com.proxyau.wrlc.org/pqdweb?RQT=302&COPT =REJTPTRhNjEmSU5UPTAmVkVSPTI=&clientId=31806&cfc=1?did=12930 27981&sid=13&Fmt=3&clientId=31806&RQT=309&VName=PQD
In this article it describes how computer programs are able to generate buy and sell orders and make trades faster then regular traders. Even though it is a sort article it goes in to detail on important things like how “Dow Jones and Reuters, the news providers, now offer electronically “tagged” news products that algorithms pick up to make programmed trading decisions.” The Britain Financial Services are also trying to get algorithms to come through trading data.
London Stock Exchange already uses this technology and “on its first day processed up to 1,500 orders a second, compared with the 600 using its precious system.” These programmed algorithms will help investors and brokers find useful information when buying and selling stock. Also because of the processing speed it can presses the large sized buying and selling in a matter of minutes or even seconds. In
A problem with these algorithms though is that while it is looking through past transactions and the news it may mistake a news article’s title, an example in the article suggests that the word “surprise” may mean the numbers are better or worse then they really are, according to Andrew Silverman of Morgan Stanley. Using words like share price or volume may be better words to use in the algorithm, Mr. Silverman suggests.
With this technology trading can be done a lot easier and faster then it is being done now. This article helped explain a lot, but left out how it was made, how can it be best protected against hackers who may mess up the algorithm. Another thing that was not mentioned in the article is if this technology will be shared to the individual stock holder or just the businesses.
5 comments:
Phil,
Interesting Article on proprietary trading algorithms, this is an area of the market that has been growing incredibly fast, 100% is due to technology. How would the events of the past several weeks impact a trader who is using them as his primary method of trading? Some news commentators have blamed them for the increasing volatility in the market. Good article.
- M. Perednis
Phil,
This article is so interesting! It is just fascinating to me that milliseconds can have such an impact on prices of trasactions. I am also amazed that there are actually computer programmers who are able to make this technology so effective (at least most of the time) and it is so widely used.
- Jessica
What I think is interesting about algorithms is it will allow companies and people to trade stock at better prices. Algorithms can locate distortions that may last for only a moment something that a human may not be able to pick up when they are trying buy or sell stock. I was surprised to find out that the London Stock exchange is using algorithms to do their trading. In addition, algorithmic trading accounted for a third of US trading. That was a surprise because I had never heard of algorithmic trading prior to reading this article. The article even goes on to say that, research firms are spending over 480 million dollars this year alone to develop the algorithmic trading. I think that is great because now I will be able to get the best price for my stock when I am selling it or buying it. Moreover, I will be able to keep up with the current events that may have an effect on my decision to buy or sell my stock for example, mergers and acquisitions, subprime, and bankruptcy.
-John
Phil's article explained many aspects of algorithms that I did not know before reading it. It is very interesting to learn that they have enabled to save a considerable amount of time for trading transactions to be elaborated. The use of algorithms is definitely a milestone in finance because it is a great progress. But Mr. Perednis is right when he wonders how past events can impact a trader using primarily algorithms as a method of trading. In this perspective, it is certainly going to be difficult to predict exactly their accuracy.
It was interesting to know that algorithms are enabling stock trade so fast which result in allowing companies and people to trade stock at better prices.
This article thought me how important the quickness is in stock exchange.
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