Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System

Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System

Language: English

Pages: 0


Format: PDF / Kindle (mobi) / ePub

A news-breaking account of the global stock market's subterranean battles, Dark Pools portrays the rise of the "bots" - artificially intelligent systems that execute trades in milliseconds and use the cover of darkness to out-maneuver the humans who've created them.

In the beginning was Josh Levine, an idealistic programming genius who dreamed of wresting control of the market from the big exchanges that, again and again, gave the giant institutions an advantage over the little guy. Levine created a computerized trading hub named Island where small traders swapped stocks, and over time his invention morphed into a global electronic stock market that sent trillions in capital through a vast jungle of fiber-optic cables.

By then, the market that Levine had sought to fix had turned upside down, birthing secretive exchanges called dark pools and a new species of trading machines that could think and that seemed, ominously, to be slipping the control of their human masters.

Dark Pools is the fascinating story of how global markets have been hijacked by trading robots - many so self-directed that humans can't predict what they'll do next.

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Fermilab colleagues. Bodek’s first assignment at Hull was to use machine learning—the same branch of AI he’d used at Magnify—to create algorithms to predict the direction of the stock-option market. It was the beginning of a dramatic trading evolution on Wall Street and among the first salvos in the coming Algo Wars. At the time, the algos that most firms used to trade were mindless drones, like single-cell organisms acting according to a basic set of rules designed by programmers. They would.

High-speed firms an overclocked workstation called Detonator. Another was called Reactor X. Tellingly, the technology had originally been invented for top-end video-game players. While trading firms were deploying the most advanced technology available, the links connecting them to the market were ramping up just as quickly. In 2007, the NYSE had launched a $500 million initiative dubbed Project Alpha. The plan was to build a mammoth computer trading facility on the site of an old quarry in.

Insiders could tap it. Indeed, under heavy criticism, BATS later backed down from the program. But it had tipped its hand, showing that it was more than ready to give certain clients a better deal than others. Bodek became determined to reveal what he believed was a corrupt insiders’ game that came at the expense of everyday investors. Was it outright collusion? He didn’t have enough hard information to know for certain. Perhaps the exchanges that had rolled out the toxic order types were.

Matt Andresen, Mike Lazarev, and countless others helped me tell the incredible story of Datek and Island. And of course there’s Josh Levine himself. I never met Levine, and I never spoke with him, but we exchanged dozens of e-mails over the past few years. He, more than anyone, gave me the vital information and perspective I needed to tell Island’s story, which is also his story. NOTES 1. Dark Pools The title of this book doesn’t entirely refer to what is technically known in the.

Joseph Facciponti laid out the government’s case in a hearing to determine whether the wayward programmer could be freed on bail. The Justice Department was charging Aleynikov with what amounted to industrial espionage, a federal offense that could earn him twenty-five years in prison. Goldman might have suffered massive damages if Aleynikov’s scheme had succeeded, Facciponti said. “The bank itself stands to lose its entire investment in creating this software to begin with, which is millions.

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