(You could argue that e.g. the Flash Crash resulted because humans weren’t in the loop, but humans can still interrupt the process eventually, so they’re not really out of the loop—they just respond more slowly.)
A new paper suggests that ultrafast machine trading is causing crashes that don’t last long enough for humans to react:
The speed in which the rises and falls occur might last no longer than half a second, unapparent to any human who is tracking prices. Johnson says if you blink you miss it. Flash events may happen in milliseconds and have nothing to do with a company’s real value.
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Following the May 2010 event, U.S. regulators, as a safety mechanism, upheld circuit breakers designed to stop trading if a stock price makes a sudden large move. Whether or not that is the best solution around, considering the speed in which today’s machine trading can occur, does not convince all market experts. At that level of resolution, one of the study authors said it was troublesome to even observe, leave alone regulate.
If we want oversight of this kind of trading, it seems like we’ll have to rely on more ultrafast machines.
A new paper suggests that ultrafast machine trading is causing crashes that don’t last long enough for humans to react:
If we want oversight of this kind of trading, it seems like we’ll have to rely on more ultrafast machines.