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>Literally every day you trust your life, privacy and money to algorithms that make decisions without human intervention. The financial system trades trillions
by NovemberWhiskey 5y ago
>Literally every day you trust your life, privacy and money to algorithms that make decisions without human intervention. The financial system trades trillions of dollars in automated systems that make split-second decisions in a way that precludes human supervision.
... but when that stuff goes wrong, which it does, we don't just say "geez that's too bad, the code is the code".
Look at the 2010 flash crash: something like 20,000 trades were broken after discussion between FINRA and the exchanges based on how far they were from the reference price.
Similarly, I don't end up eating the entire loss if my bank's anti-fraud system mistakenly approves a transaction on a stolen credit card, because I have 60 days from the statement date to report the problem under the FCBA.
The point is that in most cases where physics is not involved (e.g. flight control systems), the real-time behavior of the systems is backstopped by processes to deal with exceptions in a slower, more considered way.
- dcolkitt 5y agoKnight lost half a billion dollars in 30 seconds and not a single trade was reversed. If anything similar happened to any major hedge fund or market maker, nothing would get reversed. Every hedge fund and market maker knows that if their algorithms break, their money is gone. Period. No backsies. The point is billions in capital is already completely trusted to algorithms with no human fail safe.
- NovemberWhiskey 5y ago>Knight lost half a billion dollars in 30 seconds and not a single trade was reversed. If anything similar happened to any major hedge fund or market maker, nothing would get reversed. I am pretty sure that NYSE canceled trades in six names after Knight; and the LULD pause rules that were introduced after the 2010 flash crash (unfortunately too late to save Knight) also create opportunities for human intervention.