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Felix Salmon, Reuters, Don’t cry for “the little guy on Wall Street”, here.
This happens every time something goes wrong on the stock market — every time there’s a flash crash, or a high-frequency trading firm blows up, or the Nasdaq is forced to go dark for three hours. A bunch of editors who don’t really know anything about HFT ask for stories about it, and they all want the same thing: a tale of how a small group of high-speed trading shops, armed with state-of-the-art computers, are using their artificial information advantage, and their lightning-fast speed, to extract enormous rents from the little guy.
The result is a spate of stories like Rob Curran’s latest piece for Fortune, which appears under the headline “Make $377,000 trading Apple in one day”. Of course, there are lots of ways to do that: one way would be to buy about 77,000 shares of Apple, for $37.7 million, and then watch them rise by 1%. But Curran reckons he’s found a better way — indeed, an easy profit which involves no risk at all. What’s more, this method is particularly evil, since apparently all of the profits that it generates are coming straight out of your pocket.
Felix Salmon, Reuters, The problem with high frequency trading, here. So Mr. Salmon doesn’t like the haggle. Let me go ahead and guess that Mr. Salmon does not hang w the proletarians too much. Steer clear of him after the singularity, this British Raj affectation ” the problem with the algobots they’re always making mistakes and they don’t even seem to care about doing their jobs” business is not going to play well with the automata overlords.
The second reason that volumes are dropping is that the algobots are getting so sophisticated at sparring with each other that they’re not even trading with each other any more. They’re called high-frequency traders, but maybe that’s a misnomer: a better name might be high-frequency spambots. Because what they’re doing, most of the time, is putting buy or sell orders out there on the stock market, only to take those orders back a fraction of a second later, and replace them with new ones. The result is millions of orders, but almost no trades.
I’ll give you one example from a stock with the ticker symbol EFZ. It doesn’t matter what that ticker represents: the computers certainly don’t care. On September 11, between 6:51 and 7:08 in the morning, the US stock markets saw more than 280,000 quotes to trade EFZ. And how many times did it actually trade? Zero.
Bookstaber, Will the Unemployed Really Find Jobs Making Robots? here. This High Frequency Chicken Deboning sounds dangerous. What can we possibly do with so much deboned chicken but trade it, and for whose benefit but Ivy League trained High Frequency Deboned Chicken Traders who front run traditional mom and pop chicken deboners? They don’t even intend to eat some of the chicken. I’m calling for the FDA to institute a chicken deboning fee so we can give High Frequency Chicken Deboning the funeral it deserves.
Whatever analogue there is to the Industrial Revolution, workers do not play much of a role in it. It is interesting that u to this point much of the displacement from computers has been in the mid-level jobs, like bookkeepers. These medium skill jobs that focus on rote but quantitive tasks are the easiest for a computer to do. Replacing workers doing relatively unskilled, manual tasks is actually more difficult. But the rubicon is being crossed. For example, Meyakawa Manufacturing is shipping robots that can debone chickens at the rate of 1,500 per hour, replacing ten human workers. As one commentator put it, “if you can do that, you can do most anything.”
Scott Aaronson, Shtetl-Optimized, Why Many-Worlds is not like Copernicanism, here. I never have this much fun waiting at the airport; I must be doing it wrong.
Proponents of MWI, such as David Deutsch, often argue that MWI is a lot like Copernican astronomy: an exhilarating expansion in our picture of the universe, which follows straightforwardly from Occam’s Razor applied to certain observed facts (the motions of the planets in one case, the double-slit experiment in the other). Yes, many holdouts stubbornly refuse to accept the new picture, but their skepticism says more about sociology than science. If you want, you can describe all the quantum-mechanical experiments anyone has ever done, or will do for the foreseeable future, by treating “measurement” as an unanalyzed primitive and never invoking parallel universes. But you can also describe all astronomical observations using a reference frame that places the earth is the center of the universe. In both cases, say the MWIers, the problem with your choice is itsunmotivated perversity: you mangle the theory’s mathematical simplicity, for no better reason than a narrow parochial urge to place yourself and your own experiences at the center of creation. The observed motions of the planets clearly want a sun-centered model. In the same way, Schrödinger’s equation clearly wants measurement to be just another special case of unitary evolution—one that happens to cause your own brain and measuring apparatus to get entangled with the system you’re measuring, thereby “splitting” the world into decoherent branches that will never again meet. History has never been kind to people who put what they want over what the equations want, and it won’t be kind to the MWI-deniers either.
VLDB 2012, here.
mathbabe, When to quit your nerd job, here. mathbabe is smart.
I get lots of emails nowadays from quantitative people who are unhappy in academics, or in finance, or in tech, and want to know what they should do next, and specifically if they should quit their job. Most of them have Ph.D.’s or are even professors or well-established in their profession. They’re interested in switching fields, or at least jobs, and they want advice.
Maybe I get so many emails like this because they’ve read my advice post and realize I’m all about these three rules:
- Go for it! (this usually is all most people need, especially when talking about the crush type of advice)
- Do what you’d do if you weren’t at all insecure (great for people trying to quit a bad job or deciding between job offers)
- Do what a man would do (I usually reserve this advice for women)
I’m going to concentrate mostly on rule #2 today in giving job advice.
Salmon, Dennis Kelleher, Libor, and high-frequency trading, here.
Reminds me of a musical high frequency Python number went something like this:
Every order’s sacred
Every order’s great
If you go and waste them
He gets quite irate
…to demonstrate my anti-HFT bona fides. In the very post that Kelleher’s responding to, I write this:
I do think that the amount of HFT we’re seeing today is excessive, and I do think that we’ve created a large-scale, highly-complex system which is out of anybody’s control and therefore extremely dangerous.
On second reading this might be more of “if you want to be in the PFJ you have to really hate the Romans (read HFT)” kind of thing, not sure yet.
VR-Zone, Intel Xeon Phi (B0 Stepping): The Knight in Shining Armor? here. If you really need FLOPS here you go, but it is clocked 600 MHz, oof. Certainly not high frequency in just about anybody’s estimation except perhaps Mr. Salmon’s, who apparently feels the supernatural in all things clocked above 1MHz. The day when one of the Reuter’s interns tells Mr. Salmon about bufferbloat is the day we’re gonna get a TCP packet tax proposal blog post. I’ll start you off with the blog prose: The internet today is a war zone, where algorouterbots fight each other over latency and bandwith, billions of times a second. The packet loss and delays are so complex and the potential systemic repercussions are literally unknowable. The potential cost is huge so let’s give the internet the funeral it deserves.
Last week, Intel started sampling the B0 silicon of Xeon Phi to its preferred partners. There are five different SKUs floating around and this article will reveal the details and intricacies surrounding Intel’s attack on the GPGPU and homogenous computing.
Salmon, Why would Treasury want to issue floaters? here. Uh oh, Reuters’ website got hacked and someone posted opposite day stories. So now, for all we know, Felix is interviewing Gretchen to get the straight scoop on the genesis of the Credit Crisis.
Treasury announced yesterday that it was going to start issuing floating-rate notes, probably at some point next year, although the details are still extremely vague:
Treasury projects that it must now sell an estimated $667 billion of additional debt to the public over the next four years. The floating-rate notes will help give the government flexibility in its increased debt offerings…
Reuters, Knight trading loss shows cracks in equity markets, here.
The software glitch that cost Knight Capital Group $440 million in just 45 minutes reveals the deep fault lines in stock markets that are increasingly dominated by sophisticated high-speed trading systems. But Wall Street firms and regulators have few easy solutions for such problems.
Automated trading can handle massive volumes of transactions in milliseconds, something human traders could never do. But the benefits come at a cost: stock markets have become a jumble of exchanges, market makers, high-frequency traders, and investors using different systems that can interact in unexpected ways.
Salmon, Why finance can’t be fixed with better regulation, here.
Jim Surowiecki and John Kay both have columns today looking at the way in which regulatory structure failed to stop abuses in the financial-services industry, and wondering how we might be able to do better in future.
Surowiecki says that we trusted the banks when we shouldn’t have: their incentive to preserve their reputation was not nearly big enough to override their incentive to make money. He’s right about that. But his proposed solution is vague: first, he says, prosecutors should “admit that fraud is a crime and throw some people in jail”, and secondly regulators should “be aggressive not just in punishing malfeasance but in preventing it from happening”. Well, yes. This is the rhetorical equivalent of throwing your hands up in the air: if you end up proposing something which absolutely everybody will agree with, then there’s almost certainly no substance there.
Kay, by contrast, has been looking at UK equity markets in detail, and has determined that the problem lies more with market structure than with anything within the realistic control of prosecutors or regulators. Surowiecki’s proposal basically boils down to “all you prosecutors and regulators are weak, weak people, you should man up and go to war”. I don’t know how many prosecutors and regulators he’s talked to, but this does them a disservice: there are serious institutional and legal constraints here. And what’s more, we can’t try to reform financial-services regulation by assuming that we can easily find a whole new breed of regulators: we can’t.
Felix Salmon, Sovereign ratings aren’t very important, here. Felix is on Fiiire, again.
This comes as no surprise, for three reasons. Firstly, the news from ratings agencies which causes markets to move is normally when countries get put on watch for a possible ratings change, not when the change actually happens. Markets specialize in pricing in future events, and few if any ratings actions actually come as a surprise.
Secondly, the ratings agencies are, famously, lagging indicators when it comes to bond spreads and yields: a rise in spreads does a much better job of predicting a ratings downgrade than the other way around. The Bloomberg study would have been much more interesting if it looked at the change in spreads before the ratings action, rather than the change in spreads after it. After all, the whole thesis of the Bloomberg article is that governments are using the ratings agencies as a proxy for the bond vigilantes. And in that sense it doesn’t make any difference at all whether the ratings agencies or the bond vigilantes get there first.
And finally, the Bloomberg findings come as no surprise because they were already well known:
In a January analysis of Moody’s rating changes, researchers at the IMF used credit derivatives to show that prices moved in the expected direction 45 percent of the time for developed countries and 51 percent for emerging economies. For outlook changes, the ratios were 67 percent and 63 percent.
Why did Bloomberg feel the need to replicate the IMF study, which it cites, but doesn’t link to? That’s not clear. And it’s also unclear why Bloomberg doesn’t publish its results in a tractable form: for instance, they don’t give separate figures for the effect of outlook changes on bond spreads. Indeed, while bits and pieces of the methodology are sprinkled through the article, the actual results are confined to a single number — 47% — in the seventh paragraph; no more numbers can be found in the associated graphics, which give anecdotal examples of yields falling after downgrades but no aggregated numbers from the dataset as a whole.
Business Insider, MOODY’S DOWNGRADES GLOBAL BANKS, here.
The action will likely force many of the banks targeted post additional collateral against trades held on their books.
NYT, Joe Weisenthal vs. the 24-Hour News Cycle, here.
Weisenthal is the lead financial blogger for Business Insider, a Web site that covers the worlds of technology and finance with a mix of pithy reporting, snarky analysis and slide shows. Lots of slide shows. The site is run by Henry Blodget, a former Wall Street technology analyst who, after accepting a lifetime ban for deceptively hyping stocks during the dot-com boom, has devoted himself to figuring out exactly what our monkey brains desire and then producing more of it. The result, which now draws 15 million viewers each month, resembles an earnest version of Gawker or an unabashedly capitalistic Huffington Post. Each item is wrapped with a loud, blunt headline — a recent sample: “The Next 19 Hours Will Be Critical for the Global Economy” — and decorated with a picture that illustrates the story or one of a beautiful woman. Ideally, both.
Interesting piece in the Times about Weisenthal at Business Insider. Nominally we peek at the day to day activities and recent personal history of Blodget’s lead financial blogger. The methodology shift in the coverage of financial markets represented in the “figuring out what our monkey brains desire” quote needs more elaboration. There is something significant happening in the shift from the NYT narrative style of financial market coverage to the more episodic Blodget and Felix Salmon styles of coverage. Needs to be articulated properly.
Algorithms, Sedgewick and Wayne, 4th Edition, here. They’re covering the online free course trend starting in Aug 2012, here . They are going to sell some books, I think. First, they have the Princeton Logo for the course, that’s a big deal I suspect. Second, isn’t this a case where the dog and the tail are mixed up? We’re leading with the Book (the tail) and then mention there is this course thing (The Dog) you are probably not interested in. So where do we mention that course, the one that Bezos took before he went to Amazon? Somewhere toward the end of the announcement where people won’t see it. And lets make it two courses so they have to sign up for each one, in case they don’t like the first one. The Headline announcement should be:
Psst, Kid wanna do Algorithms with Sedgewick? Wouldja look at this? Here is a free internet course starting in August, direct from Pee – rince – ton Univer- si – tay. U in? …good! Oh, and there’s a book that will help you solve the homework problems at Amazon, buy it if you need it. Gotta go kid, see ya.
Street 101. Irving Wladawsky-Berger, Blog, here. Head of IBM Research back in the day. Probably worth tracking to see where it goes. Salmon, The problem with Marc Andreessen, here. Felix says where’s the beef? Andreessen has a blog pmarca, here. Technology Review, Moore’s Law Lives Another Day, here. Confirms what was bugging me, the 3D lithography techniques have been around since the late 80s in Japan. Used to see it in DRAM manufacturing presentations. 22 years to volume production in 22nm process for x86. Wired, April 19, 1965: How Do You Like It? Moore, Moore, Moore, here. Puff piece, but it has a link to Moore’s 1965 paper in Electronics magazine.
Next-generation 20 nm processes can support optimized versions for low power and high performance, according to an IBM expert. GlobalFoundries will decide in August whether or not it will offer such variations.Those were just two data points from wide ranging discussions at the GSA Silicon Summit here. Separately, executives said a variety of 3-D ICs will hit the market in 2014 despite numerous challenges, and CMOS scaling is slowing down but still viable through a 7 nm node.“Recently TSMC said at 20 nm there are no significant differences [in process optimizations], but I don’t believe that,” said Subramanian Iyer, an IBM fellow and chief technologist in its microelectronics division. “I believe at same node you can have two [different variations],” he said in a keynote here. Indeed, GlobalFoundries is debating whether it wants to offer high performance and low power variants of a 20 nm process it is putting in place today.
Fabless FPGA vendor Achronix Semiconductor Corp. (Santa Clara, Calif.) has announced details of its Speedster22i HD and HP product families, claimed to be the first FPGAs to be built on a 22-nm manufacturing process technology.The devices are the result of a foundry agreement with Intel Corp. announced in November 2010 and the first devices are due to sample in the third quarter of 2012.Both the HD (high density) and HP (high performance) families come loaded with a variety of high-speed data communications interfaces hardwired. These include 10/40/100G Ethernet MACs, 100Gbit Interlaken channels, PCI Express and DDR3 memory channels that run at up to 2133 Mbps. In the case of the HD1000 device these are two, two, two and six respectively. This optimizes the Speedster22i FPGAs for work in networking and telecommunications equipment although the company stresses that the devices can find applications in servers, high-performance computing, military, industrial and scientific applications. The large number of high speed memory channels provides the industry’s highest bandwidth FPGAs, Achronix claimed.Achronix’ existing product range is based on 65-nm process technology and the move to Intel’s 22-nm FinFET process allows Speedster22i family to consume half the power at half the cost of high-end, 28-nm FPGAs.
Wired, How to Spot the Future, here.
This may sound like a paradox. Surely technology always promises something radically new, wholly unexpected, and unlike anything anybody has seen before. But in fact even when a product or service breaks new ground, it’s usually following a familiar trajectory. After all, the factors governing thermodynamics, economics, and human interaction don’t change that much. And they provide an intellectual platform that has allowed technology to succeed on a massive scale, to organize, to accelerate, to connect. So how do we spot the future—and how might you? The seven rules that follow are not a bad place to start. They are the principles that underlie many of our contemporary innovations. Odds are that any story in our pages, any idea we deem potentially transformative, any trend we think has legs, draws on one or more of these core principles. They have played a major part in creating the world we see today. And they’ll be the forces behind the world we’ll be living in tomorrow.
Noahpinion, Thursday Roundup, here, I need to know more about how money market funds and commercial paper broke in the credit crisis – he points to Cochrane on money markets which is a start. The idea is to sort out where bank runs can happen as confidence evaporates. What breaks first next time? Noah Smith could be the EcoFin summary guy after DeLong. HPC Wire, Some Thoughts on Intel’s Acquisition of Cray’s Interconnect Technology, here. They lead with:
The reasons for this deal, in my opinion, are as follows: The general trend to commodity components continues. For small companies like Cray (with about 800 employees), it is simply too expensive to innovate and develop sophisticated hardware such as an interconnect for exascale computing. And Intel is certainly able to take this on, especially now with all the expertise gained from the previous QLogic acquisition and now from the 74 interconnect experts moving from Cray to Intel.