"Ultrafast Extreme Events" in Financial Markets: A Whole New World

“Ultrafast Extreme Events” in Financial Markets: A Whole New World

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“Ultrafast Extreme Events” in Financial Markets: A Whole New World

Society’s techno-social systems are becoming ever faster and more computer-orientated. However, far from simply generating faster versions of existing behaviour, we show that this speed-up can generate a new behavioural regime as humans lose the ability to intervene in real time. Analyzing millisecond-scale data for the world’s largest and most powerful techno-social system, the global financial market, we uncover an abrupt transition to a new all-machine phase characterized by large numbers of subsecond extreme events. The proliferation of these subsecond events shows an intriguing correlation with the onset of the system-wide financial collapse in 2008. Our findings are consistent with an emerging ecology of competitive machines featuring ‘crowds’ of predatory algorithms, and highlight the need for a new scientific theory of subsecond financial phenomena.

https://www.nature.com/articles/srep02627

5 comments

  1. “Our findings are consistent with an emerging ecology of competitive machines featuring ‘crowds’ of predatory algorithms”

    Nice entry point for the so-called “Singularity”, rings of HFT algorithms shuffling property faster than the eye can follow.

    “and highlight the need for a new scientific theory of subsecond financial phenomena.”

    Maybe it’s not a new scientific but a new legal theory that’s needed. Why should machines be allowed to bypass assumptions about private property that were universal before them? Why is it assumed OK for an algorithm to buy and resell value in a time less than it would take to any human representative of the owning corporation, to become aware of ownership?

  2. Boris Borcic, well, it depends whether you are assuming that an algorithm has agency. Otherwise, it is just a tool for a human, and the human is free to use whatever tools are not explicitly prohibited by the law.

    Don’t get me wrong, however. What this research shows is that we broaching a new reality of time where humans are not equipped to play – at least unaugmented humans.

  3. Gideon Rosenblatt the above is a 10 years-old objection to HFT of mine, fit for a period that anticipated “AI singularity”. Machine agency galore! Not my hypothesis, theirs.

    My contribution is to say, HFT appears capable to offer a shortcut to “Singularity” via writing the well-above-Hz part of the spectrum of private property. Or private property exchange. A part of the spectrum that’s too fast for humans.

  4. Gideon Rosenblatt – Technically, these algorithms are augmented humans, or, more accurately, the augmentation component of augmented humans; notionally, a mustard gas shell or machine gun or landmine or nuclear device aimed at financial market opposition.

    I’ll confess to a bit of Ludditism, but I think we’ve been anticipating the wrong singularity: logic and, e.g., this evidence strongly suggest that the meat component is the weakest link; the human frailty that is our individual and communal ego represents an inefficiency that must be optimized against.

    That doesn’t bode well for our persistence.

  5. Michael Verona, agreed. The solution, of course, is for us to think more better:

    https://plus.google.com/photos/

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