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Hmmm... I both agree and disagree. While humans program the general strategy, and even the bugs they didn't think they were adding, there is a substantial diffe

Hmmm... I both agree and disagree. While humans program the general strategy, and even the bugs they didn't think they were adding, there is a substantial difference: computers can and will act in such a completely stupid way as to be obviously stupid to even the most uninformed human. What I fear the most is a silly bug causing a crash in a way no manually triggered series of trades would.

dsfyu404ed 7y ago
>What I fear the most is a silly bug causing a crash in a way no manually triggered series of trades would. Banks are run by smart people and they worry about the same things. There's dedicated systems checking to ensure algorithms aren't running away. All the big banks and brokers have been buying them for a decade or so. Nobody wants a crash and the algorithmic traders are mostly using a line of credit from the bank with which to do their trading and the bank usually take a commission on the profit so the banks have a strong interest in seeing them make money as opposed to crash the market and disappear into bankruptcy proceedings. Of course the government also swooped in and saved the day by mandating risk checking systems a couple years after everyone who cared was already using them (thereby solidifying the status quo for better or worse).
- benj111 7y ago
  Could you not say the same kind of thing about mortgage backed securities, Fannie Mae etc? We've had flash crashes, which aren't in peoples interests, they still happened. I don't think its reasonable to hand wave it away, because "smart people". Programmers are supposedly smart people,I've yet to come across a perfect bug free program.
  - dsfyu404ed 7y ago
    >Could you not say the same kind of thing about mortgage backed securities, Fannie Mae etc? Human based checks are easier to subvert than automated ones. >We've had flash crashes Which is exactly the problem that most banks and markets try to prevent. Any system that uses what other people are doing as a strong enough input is going to be susceptible to this to some degree. If you try to buy too many shares of something or for too disparate of a price compared to the market the bank will almost certainly kill your order. The exchange might kill it too. Depending on your contract with the bank and exchange they may kick your session for the day if you do it too much (once may be too much). The limits most banks place on what you can do mean that runaway algorithms can really only be a slow tug in one direction or the other which is no big deal.
    - acjohnson55 7y ago
      At the end of the day, both systems are subject to issues. Computers are far more disciplined than humans, but that comes with a tradeoff of lack of introspection.
    - benj111 7y ago
      "Human based checks are easier to subvert than automated ones." I disagree. They're easily subvertable, but in different ways. "Which is exactly the problem that most banks and markets try to prevent" But they haven't succeeded so far. Further, as the saying goes, history never repeats itself, but it rhymes. It's all well and good doing all these automated checks based on past issues, that's not going to help with the next issue that isn't enough like the one before.
      - selestify 7y ago
        What are the different ways in easily subverting people versus machines?
        mattkrause 7y ago
        A machine will hold you, strictly, to the letter of the law. A person might consider giving you a bit of wiggle room on the exact letter of the law, but can also ensure you comply with the spirit of the rules.
- swsieber 7y ago
  They worry with good cause. We worry about bugs where I work, and they still make it through somehow. Worrying about them doesn't prevent them. See also, Knight Capital: https://dealbook.nytimes.com/2012/08/02/knight-capital-says-trading-mishap-cost-it-440-million/ https://dealbook.nytimes.com/2012/08/02/knight-capital-says-... , where a bug cost it $440 million. It's already been seen on a small scale.

dsfyu404ed 7y ago

>What I fear the most is a silly bug causing a crash in a way no manually triggered series of trades would. Banks are run by smart people and they worry about the same things. There's dedicated systems checking to ensure algorithms aren't running away. All the big banks and brokers have been buying them for a decade or so. Nobody wants a crash and the algorithmic traders are mostly using a line of credit from the bank with which to do their trading and the bank usually take a commission on the profit so the banks have a strong interest in seeing them make money as opposed to crash the market and disappear into bankruptcy proceedings. Of course the government also swooped in and saved the day by mandating risk checking systems a couple years after everyone who cared was already using them (thereby solidifying the status quo for better or worse).

benj111 7y ago
Could you not say the same kind of thing about mortgage backed securities, Fannie Mae etc? We've had flash crashes, which aren't in peoples interests, they still happened. I don't think its reasonable to hand wave it away, because "smart people". Programmers are supposedly smart people,I've yet to come across a perfect bug free program.
- dsfyu404ed 7y ago
  >Could you not say the same kind of thing about mortgage backed securities, Fannie Mae etc? Human based checks are easier to subvert than automated ones. >We've had flash crashes Which is exactly the problem that most banks and markets try to prevent. Any system that uses what other people are doing as a strong enough input is going to be susceptible to this to some degree. If you try to buy too many shares of something or for too disparate of a price compared to the market the bank will almost certainly kill your order. The exchange might kill it too. Depending on your contract with the bank and exchange they may kick your session for the day if you do it too much (once may be too much). The limits most banks place on what you can do mean that runaway algorithms can really only be a slow tug in one direction or the other which is no big deal.
  - acjohnson55 7y ago
    At the end of the day, both systems are subject to issues. Computers are far more disciplined than humans, but that comes with a tradeoff of lack of introspection.
  - benj111 7y ago
    "Human based checks are easier to subvert than automated ones." I disagree. They're easily subvertable, but in different ways. "Which is exactly the problem that most banks and markets try to prevent" But they haven't succeeded so far. Further, as the saying goes, history never repeats itself, but it rhymes. It's all well and good doing all these automated checks based on past issues, that's not going to help with the next issue that isn't enough like the one before.
    - selestify 7y ago
      What are the different ways in easily subverting people versus machines?
      - mattkrause 7y ago
        A machine will hold you, strictly, to the letter of the law. A person might consider giving you a bit of wiggle room on the exact letter of the law, but can also ensure you comply with the spirit of the rules.
swsieber 7y ago
They worry with good cause. We worry about bugs where I work, and they still make it through somehow. Worrying about them doesn't prevent them. See also, Knight Capital: https://dealbook.nytimes.com/2012/08/02/knight-capital-says-trading-mishap-cost-it-440-million/ https://dealbook.nytimes.com/2012/08/02/knight-capital-says-... , where a bug cost it $440 million. It's already been seen on a small scale.