Ghost in The Machine: The Mysterious Wall Street Algorithm


Recently, an underreported development regarding Wall Street trading has been quietly making its rounds. Evidently, a mysterious computer program was busy placing “buy” orders – and then would just as quickly cancel said orders. As reported in CNBC’s “Behind The Money”” on Monday, October 8th:

The program placed orders in 25-millisecond bursts involving about 500 stocks, according to Nanex, a market data firm. The algorithm never executed a single trade, and it abruptly ended at about 10:30 a.m. ET Friday. “Just goes to show you how just one person can have such an outsized impact on the market,” said Eric Hunsader, head of Nanex and the No. 1 detector of trading anomalies watching Wall Street today. “Exchanges are just not monitoring it (emphasis ours).

So weird things pop on Wall Street, what else is new? These are the people who brought about the creation of ‘derivatives’ and ‘spiders’: Wall Street is a haven for taking notions of finances to the extremes. Except that in this situation, there’s more to the story.  The scariest part of this (single) program was that its millions of quotes accounted for 10 percent of the bandwidth that is allowed for trading on any given day (according to Nanex) with an overall impact for the weeks total trade on Wall Street amounting to 4% of the entire week!

So let’s get this right: a strange program pops out of nowhere, does a routine whereby nothing is truly traded, bought or sold and then jumps away only to disappear out of sight as if it never happened – and wouldn’t have even been noticed save by chance from a group of dedicated observers?

Earlier, we blogged about AI (Artificial Intelligence) and the coming singularity. To be certain, there is likely evidence that this algorithm placement was a deliberate act on somebody’s part to try and enact a greater degree of arbitrage through artificially ‘enhancing’ the number of sales / activities: and from all indications, they got away with it leaving yet another challenge for regulators to deal with.

But then again, in this day and age of the coming singularity, it does make one wonder: who’s to say that it was an actual person or people behind all of this,…?

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