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It surprises me that a multitude of separately developed systems acting in the same 'playground' don't give rise to more emergent behavior. I would expect acci
by otakucode 7y ago
It surprises me that a multitude of separately developed systems acting in the same 'playground' don't give rise to more emergent behavior. I would expect accidental death spirals as systems unknowingly couple together and get caught in a loop of failing together, along with the polar opposite of just astronomical growth spurred by nothing but the systems bidding logic interlocking in unexpected ways.
Sure there have been catastrophic failures like Knight Capital, but those, at leas the ones I am aware of, all boil down to the system having flaws. I have yet to see a system which worked and followed the logic the designers intended, but which is accidentally (or purposely?) exploited by other automated systems doing the same. Shouldn't the complexity of these systems make such a thing almost inevitable and common?
- 1e-9 7y agoThey undoubtedly do to an extent, but the exchanges use price limits, trading halts, and mandatory nonstop human supervision to keep things under control and allow human operators time to kill errant systems that are losing money. Trading firms and clearing firms require additional safeguards to limit instability and losses. Also, if some group of trading systems does go wheels-off in a positive feedback loop, there's likely to be another, larger group of trading systems operating correctly and taking the other side to eventually stabilize prices.