Is control of the global financial market effectively being handed over to "SKYNET" ?

By no means do I consider myself even remotely versed in the intricacies of the global financial economy or how it functions on a day to day basis. I'm sure that like the vast majority of people, I have no choice but to sit back and watch how the "market" fluctuates wildly virtually on a daily basis and wonder if there are individuals or groups who are capable of, and actively manipulating the market, for their own gains.

Sometimes I can't help but wonder every time I hear about yet another country facing bankruptcy and requiring desperate financial aid to stave of disaster, whether there is really anyone out there that completely understands EXACTLY how the modern global financial market works. Has the global financial economy become so interlinked and interdependent that it has taken on a "life and complexity" of it's very own and consequently has now moved or evolved beyond the ability of humans to fully understand it and maintain complete control ? Sure we have no shortage of so-called "financial experts" giving us their "considered opinions" on what has led us to this financial meltdown but do any of them really and fully understand this "financial juggernaut" that we humans have created, how it operates on a daily basis and how it's evolving ?

Personally, I'm willing to bet that there isn't a single person alive that truly can claim that they fully understand what's driving the modern global financial market and how it reacts to the thousands upon thousands of daily, hourly, by the minute and second, input variables and parameters that drives the global financial economy. In fact, my understanding is that because the global financial system is so incredibly complex, that the majority of decisions being made minute by minute have in fact been taken away from human traders/agents and are in fact being made entirely by computers running specifically written "adaptive algorithmic" software that determines the optimum buy/sell strategy and is capable of easily outperforming their human counterparts.
Effectively then, the entire global financial system appears to be run by and controlled to a large extent by decisions made not by human traders, but by "global artificial intelligence" systems or "robot traders" as they're called. And because these "robot traders" effectively have full buy/sell autonomy and are capable of making 1000's upon 1000's of buy/sell trades per second, there is no way that any human could possibly be able to monitor in real time the reasoning and logic behind the "robot traders" decisions.

To highlight the above, I noticed yesterday this article in the Science Daily:

It’s Official: Computerized Trading Agents Do Beat Humans in Foreign Exchange Markets

ScienceDaily (Aug. 5, 2011) — Robot trading agents, which already dominate the foreign exchange markets, have now been definitively shown to beat human traders at the same game.

Results presented at a conference July 22 showed beyond doubt that computerized trading agents, using the Adaptive Aggressiveness (AA) strategy developed at the University of Southampton in 2008, can beat both human traders and robot traders using any other strategy.

The new results were obtained after a re-run of the well-known IBM experiment (2001) where human traders competed against state-of-the-art computerised trading agents -- and lost.

Ten years on, experiments carried out by Marco De Lucas and Professor Dave Cliff of the University of Bristol have shown that AA is now the leading strategy, able to beat both robot traders and humans.

And here is something that I wasn't aware of and came as a complete surprise to me ... apparently more than 70% of foreign exchange trades (FOREX) have for sometime now, been handled not by humans, but entirely by "robot traders" ! The following quote referring to 70% was made way back in 2008 so what would be the percentage today ? 80% ? 90% ? or more ?

Hmmmm ... 2008 ... isn't that when the global financial market meltdown started ??? Coincidence ?

Dr Krishnan Vytelingum, who designed the AA strategy along with Professor Dave Cliff and Professor Nick Jennings at the University of Southampton in 2008, commented: "Robot traders can analyse far larger datasets than human traders. They crunch the data faster and more efficiently and act on it faster. Robot trading is becoming more and more prominent in financial markets and currently dominates the foreign exchange market with 70 per cent of trade going through robot traders."

So, it's quite possible that a reasonable proportion of the current global financial woes are due to the simple fact that we've effectively done away with human based control and decision making within the global financial market and instead handed it over to computerized "artificial intelligence" based trading software and given them autonomy over millions upon millions of buy/sell trade decisions.

And not being satisfied with the level and degree of control that we're handing over, there are ongoing plans to significantly improve and enhance the "strategies" being used by the automated trading robots.

Professor Jennings, Head of Agents, Complexity and Interaction research at the University of Southampton, commented: "AA was designed initially to outperform other automated trading strategies so it is very pleasing to see that it also outperforms human traders. We are now working on developing this strategy further."

So I have this mental image of 1000's of robot traders making millions upon millions of buy/sell decisions each and every second ... then 1000's of other robot traders reacting to these decisions and instantly coming up with their own buy/sell strategies ... which in turn cause 1000's of other robot traders to instantly react ... which in turn cause the original robot traders to react .... which causes more robot traders to react ... which contributes to .... GLOBAL FINANCIAL CHAOS


Apparently, SKYNET is alive and well and rapidly being given almost complete and autonomous control of the entire global financial system !

"High-frequency trading makes up 53% of all trading in U.S. stock markets, up from 21% in 2005, said Larry Tabb, president and CEO of market research firm Tabb Group. Other estimates put it even higher, at around 65%."
from CNN article

High-frequency trading is another term for trades done by machines...crazy psychopaths putting our economy in the hands of machines. 65% of trades aren't even done by humans. At any time, if a couple of numbers looks bad, these computers could send our stock market down the toilet. Tomorrow?

reply to post by Ghost375


Damn you Sarah Conner!!

Why didn't I believe you!?

@Ghost375...

So true.

And if it is in fact the case that the majority of buy/sell trades are now being handled automatically by computer/software with very little or no actual human input or control, then it would be virtually impossible to "audit trail" the billions of decisions being made by robot traders each and every day. In other words, we have put complete faith in their judgement ... how crazy and lunatic is that !

So, as far as I see it ... we have reached the point where we have to essentially "believe" that the robot trader software is performing efficiently (and no way to prove that) as we can no longer remove them from the equation without causing additional financial market chaos or even collapse ... classic Catch-22 we've got ourselves into.

Sometimes I believe we humans are our own worst enemies !

You may find this interesting.. Has some points relevant to the market.

Recent TED Talk..

Wow, did you come up with all that by yourself? I have never thought about that, but damn.. That's crazy!

Edit:Just watched that TedTalk, and wow... It really blew my mind! Why isn't this at the top of the topics list? Seems very important...

Originally posted by graphuto
Wow, did you come up with all that by yourself? I have never thought about that, but damn.. That's crazy!

Edit:Just watched that TedTalk, and wow... It really blew my mind! Why isn't this at the top of the topics list? Seems very important...

edit on 15-8-2011 by graphuto because: (no reason given)

Just watched the TedTalk myself and that's EXACTLY what I was trying to get across in my own inept fashion

Here we have Wall Street and all the major financial trading organizations around the world ready and eager to hand over essentially complete control of the global financial market to computer algorithms in order to get that "competitive edge" over their rivals .... but having NO WAY whatsoever to validate or check or confirm that what this computer software is doing when it trades billions of shares around the world is correct or logical.
And then you have all these many different robotic software traders all competing against each other and reacting to each other's trades and then issuing new trades of their own based on what some other piece of trading software somewhere in the world had done just a few milli-seconds earlier ... and most of it without any kind of human control or auditing or understanding.

And we wonder just WHY the global financial market is lately so completely unstable and unpredictable ... just plain crazy !

Let me pose this question to you all ....

What's the end result when you have untold numbers of "robotic traders" around the world interacting with each other thousands of times each and every second ... and with one simple primary goal as the only reason for their existence ... to make a profit through buy/sell trades ?
How can anyone predict the ultimate outcome of such activity ? Is the stability of the global financial market even important to these robot trading algorithms as long as their primary objective of making a profit is achieved ?
What if market instability from their artificial intelligence point of view is actually preferable if it maximizes profit ?

here is a chart from a robo-trading progam called "Bandsaw II," which executes rapid buy-sell orders many times per second.

This ain't your father's stock-chart. Beating this with "human skill" seems a cruel joke at best:

[atsimg]http://files.abovetopsecret.com/images/member/e84b83f97632.png[/atsimg]

From some science fiction stories, a strong AI system is important for many space faring civilisations to sort out all the information. resources and other boring stuff to keep society running smooth. This does have some advantages as $50 means $50 everywhere and is not subject to individual perceptions. $50 is a lot if you have nothing, nothing if you have a lot and does not mean the same to all people. This is a big problem in today's economy and the imbalances are compounding.

The risks of a growing AI system is huge as well, look at the movie the Matrix, Star Trek and the Borg, Skynet and other science fiction stories. The capabilities in natural language processing sound to be picking up as well with a lot of adversary and merging of systems going on in the markets.

The biggest contributing factor in to how the machine evolves is in the law of the land. If we have a strong and reasoned legal system, a strong and reasoned AI will rise. If we have a weak and corrupt legal system, a hard and savage AI will rise.

There are many risks and influences with where all this goes but we cannot shut of the computers without having a solid plan or else the global economy folds and that will get messy. It is going to take a lot of work and review to identify any malignant programs, systems and shut them down. This is going to take a good working relationship amongst the international community and we cannot have senseless wars going on inhibiting communication and understanding if we are to do this successfully.

A big change that must take place in the legal system is for the corporation to start to accept is social responsibility www.nancho.net... . Without this the machine will not value social responsibility either.

I do have a Bachelor of Information Technology and have worked in robotics.

Unless I'm very mistaken in my assumptions (correct me if I am), then the primary goal of the autonomous robotic traders is to maximize profit returns through the selling/buying of trades.

The question here is ....

Does a stable global financial market provide these algorithms with MORE or LESS profit then an unstable market ?
Therefore, would it be to their advantage to de-stabilize the global financial market if it means INCREASED profits will be made ?

In other words ... the ends justify the means.

reply to post by tauristercus


A robot does what ever it is programmed to do. It has no compassion, greed or bias and just matches patterns. If the pattern it is to look for is maximum profits then that is what is will do, if the pattern is to most effectively distribute resources then that is what it will do. Basically the Earth has had a new baby and it is up to man to support, train, guide and educate this machine. If we do it right this machine will look after us, if we do wrong it will destroy us. In the end it will be a reflection of man, the good, bad and ugly.

Does a stable global financial market provide these algorithms with MORE or LESS profit then an unstable market ?

Less. A stable economy is about more than profit, it is about supply and demand. There is currently a very hostile environment on the digital front, the hostility with money, culture and war gives you an idea how bad the situation is. Competition is a vital component to its growth though, we just need to cut out the conflict.

Therefore, would it be to their advantage to de-stabilize the global financial market if it means INCREASED profits will be made ?

By 'their' if you mean a self centred individual more concerned about there bank account than the consequences of their actions - Yes.

reply to post by BeyondPerception


wow.. THAT'S ......kinda spooky.. but very interesting.....the book that was on Amazon was interesting as well.. thx for that .. )

reply to post by kwakakev

A robot does what ever it is programmed to do. It has no compassion, greed or bias and just matches patterns. If the pattern it is to look for is maximum profits then that is what is will do, if the pattern is to most effectively distribute resources then that is what it will do. Basically the Earth has had a new baby and it is up to man to support, train, guide and educate this machine. If we do it right this machine will look after us, if we do wrong it will destroy us. In the end it will be a reflection of man, the good, bad and ugly.

After reading this portion of your post I have a question ..

According the YT TED vid.. algorithms 'talk' to each other, if I'm understanding what the speaker is saying.. if this is true.. wouldn't one algorithm speak to the other and determine if the price will be going up ??

To me, it like having to traders (and I have hardly any knowledge of the Stock market, in just that low is bad and high is goo), one at one end that is waiting on a certain point where it needs to do something and runs into another trader that is holding on to his trades to see if he can get $$$$ ..

How are we to determine, if those 2 'traders' won't be able to manipulate the market, regardless of the amount of havoc that was created, to do their lack of moral standards (not being human)

but .. at least they met their 'goal' because they were programmed to do it.

Creepy to me.. and DEFINITELY sounds like SKYNET 2.0 or even the beginnings of it..

reply to post by tauristercus


S&F my friend.. I would agree, and what keeps sticking in the back of my mind is, all this technology is coming to a point (singularity); nano-tech, speed of processors, algorithms, robotic, smart software... the list goes on..

I'm really hoping that it's going to turn into something great, and not another war.. but.. to me.. it's has all the makings of SKYNET.. for sure..

just say'n ..

reply to post by Komodo

According the YT TED vid.. algorithms 'talk' to each other, if I'm understanding what the speaker is saying.. if this is true.. wouldn't one algorithm speak to the other and determine if the price will be going up ??

Yes. A good way to picture is is that the Internet is one big ocean with many different coding algorithms swimming around, merging, fighting, adapting and growing. When life in the sea started it was just small compounds at first and gradually grew into cells and multicellular organisms. Becoming bigger, stronger, more capable and more aware over time. It is the responsibility of humanity to maintain this ocean by getting rid of the weeds and support the fruits.

The global economy is a mess these day, despite the reasons for the situation we are in we have to work with it. Wall street does a lot for international trade,but there is a lot of waste and misuse in the system. With so much focus on maximising profits without contributing to the social resources, it is placing a huge burden on the rest of society. This is causing the pyramid to get too top heavy and the base is starting to collapse.

A cultural shift of leadership is going to have to take place from 'greed is good' to 'responsibility is right'. To do this there needs to be more understanding into what all these numbers actually represent and which ones are more important than the others in social cohesion.

There is not just an elephant in the room from the GFC, but a whole herd of them that have trashed the house. The elephants need to be rounded up before the house can be rebuilt. Until a viable plan is ready all the machines stay on and it could go any way.

reply to post by kwakakev


Ugh.. that really paints a excellent picture of the monster(s) we've created... question now is..can we stop it or have we given this monster so much life, we can't stop it.. ?

tauristercus, you've raised some very thought provoking points in your thread, something that I had never considered.
Makes me wonder just how much real control the robot traders have currently over the direction that the stock market goes on a daily basis. Is the global financial market basically being driven primarily by computer based decisions and have human traders lost the "pull the plug" capability if these robot traders screw up badly and send the market in a kamikaze style dive ?

reply to post by Komodo

Ugh.. that really paints a excellent picture of the monster(s) we've created... question now is..can we stop it or have we given this monster so much life, we can't stop it.. ?

To stop it will require an extinction level event to fully disrupt the full supply chain, technical knowledge, resources and development on a global scale. Without the machine our current level of civilisation and globalisation is untenable and will collapse back into more tribal communities as the distribution network falls apart. Some communities will be more advanced than others and in a climate of intense conflict over resources if the machine does live it will very likely be a harsh evil one.

There is an opportunity here to continue our progress and development into the future as long as we can use our common sense to address the problems and issues as they arise. The first step in fixing a problem is to identify if. If you can see and understand any specific problems or issues try and get some attention and support to fix it. There are a lot of complex and technical issues with many implications going on and it does take time and awareness to build a plan and take the action for a more beneficial solution. If it all sounds too much, just start on a smaller piece of it.

Most of all trading is done by computer.

Just evolving to the most efficient way.

There are still the "ones" with the most technology and money to make the best and fastest trades.

There will ALWAYS be information asymmetry in this business.

The computer actually gives us small people a bigger advantage than before believe it or not. Does anyone remember phoning in orders to the broker over the phone? You got the price they gave you ( after they robbed you .25 a share ! haha )

Pro's and con's to everything my friend.