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4 of 4 people found the following review helpful
Shallow coverage - better handled in a scholarly book with some mathematics included.
on April 8, 2014
I believe that many of the folks interviewed in this article could have given more to their presentations if they were given a longer opportunity and more technically focused questions. For someone unfamiliar with the rapidity with which changes in computer networked markets have occurred, this level of presentation is perhaps appropriate. I was glad to see that the issue was being raised although I expect that the breadth of coverage and understanding will be limited. I worked as an application developer back in the early days of computer networking when Arpanet was evolving into the early internet and conservative institutions like banks still relied on separate channels for wire transfers and serial communications for reliable interconnections between terminals and hosts. In those days I was able to start with a marketing system for "Short Term Commercial Paper" which relied on actual certificates presented to customers and then redeemed at maturity via a "cash window." and transform it into one with serial communication based purchase and maturity confirmations and supporting automated wire transfers. The per transaction estimated cost of operating this system to the corporate issuer was taken from $40-45 per trade to $5-7 when the automation was rolled out. This one application hosted an outstanding balance of $27 billion dollars for the financial institution which at the time would have qualified as the world's fourth largest bank. One technical failure of a device called a "MUX" which was the only failure in five years of operation, caused the issuer to have to resort to manual wire transfers based on a printed report. The volume had so increased that the organization was unable to make the wire transfer deadline for about half of the transactions and even though the floor manager directed that the largest transfers be processed first, banks ended up charging the issuer over $40,000 in overnight interest on the transactions which did not get completed. That was only 25 years ago! Now there are free automated applications which manage bidding activity for sales at sites like eBay which distort the market horribly because the market model is based on a slower manual submission of bid assumption and the host software cannot "keep up" with the volume of tiny incremental bids at the last moment before an auction closes, making completion of an automated purchase a gamble which prevents the seller from realizing the optimum return from an auction sale.
IMHO the processes of trading in securities we permit today make it impossible for the traditional "small investor" to participate, and lock in the hidden taxes and commissions of levels of advisors and advisory software issuers that feed off the market adding no value except that which comes from distortions they introduce which bias the process toward their abilities to exploit controlling positions in the market and its' networks. The so-called "dark pools" of random probability which are being mapped by sophisticated software algorithms on ever increasingly high speed hosts and networks make it possible for only a very limited minority of the participants to begin to make sense of and profit from high frequency trading. The folks who are working to provide alternative market networks for big institutional firms that charge a premium for transparency and warranted response times so that these big firms can avoid the chaos of a flurry of bits so dense that network "choke points" are the differences which permit some trades to be completed while other fail are profiting from bucking the trends that have driven transaction costs down to fractions of a penny and accelerated trading to the speed of light or close to it. When the equivalent of a denial of service attack created by the automated systems participating in one of these markets gets started, as in a possible financial panic, the whole system can collapse. The vulnerability to disruptions and the magnitude of impacts possible have grown exponentially since my day as an application designer and programmer. Our public understanding and legal basis for regulating the situation has not kept up and has fallen farther and farther behind as wealth and power has become more concentrated in our financial markets. I[m not sure how clearly this documentary presents the situation because only "big picture" generalities come out as sound bytes from the experts being interviewed. It would have helped if one or two of them had been able to reference books and articles delving into the technical issues behind some of their generalities. IMHO the treatment of the potential risk of the currently essentially unregulated chaos was papered over, in part because some of the harshest and clearest critics of the situation were not consulted.