Algorithms take control of Wall Street

Re:Algorithms take control of Wall Street by chrisaycock on Sunday January 09, 2011 @08:37PM (#2087073)

This article is very poorly researched. For example, it refers to high-frequency traders as "flash traders". I have never heard that term before. The cited Wikipedia article discusses flash orders, which was a quoting mechanism that DirectEdge experimented with in 2009. Flash orders are not some most automated market markers even care about.

Also, the article mentions Harold Bradley as "among the first traders to explore the power of algorithms in the late '90s", completely omitting much earlier pioneers such as Peter Muller and David E. Shaw.

And of course it goes into depth about the Flash Crash without once mentioning Waddell & Reed, a discretionary (non-quant) fund whose errant trade started the crash to begin with.

Reading this was like watching the 11-o'clock news discuss a medical discovery.

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Re:Algorithms take control of Wall Street by beagle3 on Monday January 10, 2011 @08:52AM (#2088437)

Everything else you said was spot on, but this is wrong:

> And of course it goes into depth about the Flash Crash without once mentioning Waddell & Reed, a discretionary (non-quant) fund whose errant trade started the crash to begin with.

Waddell & Reed had nothing to do with the big flash crash, nor with the 10 slightly smaller crashes that has happened since -- at least, not any other non-HFT trader had that day. If you want something which isn't some ridiculous CYA, read Nanex's analysis, not the SEC.

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Re:Algorithms take control of Wall Street by w1ntermute on Sunday January 09, 2011 @09:45PM (#2087232)

Nothing unusual then. Pretty much every tech article in the WSJ is of this caliber.

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Re:Algorithms take control of Wall Street by atuladhar on Sunday January 09, 2011 @10:09PM (#2087274)

Except that I see no indication this is a Wall Street Journal article. The site is Ars Technica; the by-line says "By Felix Salmon (wired.com), Jon Stokes" and the end of the article says "Felix Salmon (felix@felix salmon.com) is a blogger for Reuters."

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Re:Algorithms take control of Wall Street by chrisaycock on Sunday January 09, 2011 @10:22PM (#2087304)

I think what @w1ntermute means is that we can expect Ars to screw-up finance stories just as the WSJ screws up tech stories. Kind of an admonition for when journalists choose to venture beyond their expertise.

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Re:Algorithms take control of Wall Street by w1ntermute on Sunday January 09, 2011 @11:26PM (#2087467)

Yeah, sorry I didn't make that clearer. I made the comment while this[0] poorly researched/written WSJ tech article was still on my mind.

0: http://news.ycombinator.com/item?id=2086738

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Re:Algorithms take control of Wall Street by mediaman on Sunday January 09, 2011 @11:47PM (#2087516)

That's odd; Felix Salmon writes almost exclusively for the financial industry, and used to run his own blog. Reuters hired him for his finance industry audience. It's surprising that he would make elementary errors regarding his industry of primary coverage.

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Re:Algorithms take control of Wall Street by ggruschow on Monday January 10, 2011 @04:42AM (#2087978)

It's easy to be wrong when it's so hard to make out what's right. Algorithmic traders are unusually secretive about their modes of operation. The primary knowledge dissemination mechanism is via employees moving.

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Re:Algorithms take control of Wall Street by jrockway on Monday January 10, 2011 @07:36AM (#2088261)

Uh, but the Wikipedia article on the topic has the relevant information in this case.

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Re:Algorithms take control of Wall Street by jfager on Monday January 10, 2011 @08:45AM (#2088416)

which was a quoting mechanism that DirectEdge experimented with in 2009

Could you go into more detail about what you mean by that? Unless you're being pedantic about something specific, I don't get how you could say that. Flash trading (in several variations) is basically the only thing Direct Edge offers, and they currently carry roughly 12% of the market's daily trading volume.

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Re:Algorithms take control of Wall Street by Dn_Ab on Monday January 10, 2011 @01:50AM (#2087743)

>Also, the article mentions Harold Bradley as "among the first traders to explore the power of algorithms in the late '90s", completely omitting much earlier pioneers such as Peter Muller and David E. Shaw

Don't forget the super pioneering work that Claude Shannon and Ed Thorp were doing way back in the 60's and 70's too!

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