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Predatory HFT

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Tagged As: Business, Finance, and Hacking

Annnnnnd it's here. High Frequency Trading has continued to stay off the public's radar largely because most people 1) just don't care and 2) don't understand it. They should start caring. The software has already proven to beat humans on a general basis and has been the primary factor in traffic volume for more than half a decade. The original models were largely looking for trends and arbitrage opportunities but the newest algorithms ... are exploiting each other. Analaysts have examined mini "spikes" and "crashes" and determined they occurred too quickly and corrected too quickly to be the result of humans. But those anomalies are different than HFTs in the past which tended to bandwagon with each other for similarity in their algorithms. The new models appear to be predatory, essentially anticipating the behavior of another algorithm and quickly shaping a market condition to trigger the prey's activity in order to create artificial arbitrage.

The next market crash is going to be spectacularly devastating.

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