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While reading the news last night I came across a couple of interesting articles that I thought I'd share with the group.
Computerized algorithms are quickly replacing single-stock analysts and investors, leading to big changes in the way the stock market will value companies and increasing the chance that software glitches or hack attacks will jeopardize market stability.
Technological forces—including high-frequency trading, an explosion in exchange-traded funds and the proliferation of free information via social media—are behind this seismic shift, according to Nicholas Colas of ConvergEx Group.
"The changes that started with high-frequency and algorithmic trading are just the first step to an entirely different process of determining stock prices," Colas wrote in a sweeping note to clients Monday. "Will an equity market running on algorithmic autopilot serve to tie the managers of capital (senior executives) to the ultimate owners (shareholders) as robustly as one dominated by flesh-and-blood money managers? It seems a stretch to think so."
See More: http://www.cnbc.com/id/100685958
Laser beams and microwave dishes are the latest weapons in an arms race to shave milliseconds off dealing times in the shadowy world of high speed, computerized financial trading.
Traders, who make money by exploiting tiny, lightning-fast price changes on exchanges are now targeting Europe and Asia after skirmishing in the U.S.
Investors have blamed high speed traders for exaggerating market movements—including the biggest-ever daily plunge in gold last month—while ethical issues have been raised at a time when the reputation of the financial sector as a whole is under scrutiny as a result of scandals such as banks rigging the Libor interest rate benchmark.
As competition has intensified, HFT firms have gone to huge lengths to gain an edge, hiring scientists to develop computer algorithms, and trimming fractions of seconds off trading times by moving their computer servers into exchange data rooms.
Being fastest to transact between two trading centers is most important to one type of HFT strategy, arbitrage, where traders seek to be first to exploit price differences in two securities in different locations.
For example, when a share on the Deutsche Bourse is out of sync with its equivalent futures contract in London or vice versa, HFT computers will simultaneously buy the cheaper one and sell it on the more expensive market.
See More: http://www.cnbc.com/id/100695563
So, do you think we have a chance?