By Scott Patterson
A news-breaking account of the worldwide inventory market's subterranean battles, Dark Pools portrays the increase of the "bots"- artificially clever platforms that execute trades in milliseconds and use the canopy of darkness to out-maneuver the people who have created them.
In the start used to be Josh Levine, an idealistic programming genius who dreamed of wresting keep watch over of the industry from the large exchanges that, time and again, gave the enormous associations a bonus over the little man. Levine created a automatic buying and selling hub named Island the place small investors swapped shares, and over the years his invention morphed right into a worldwide digital inventory industry that despatched trillions in capital via an unlimited jungle of fiber-optic cables.
By then, the industry that Levine had sought to mend had became the other way up, birthing secretive exchanges referred to as darkish swimming pools and a brand new species of buying and selling machines which could imagine, and that appeared, ominously, to be slipping the regulate in their human masters.
Dark swimming pools is the attention-grabbing tale of ways worldwide markets were hijacked by way of buying and selling robots--many so self-directed that people cannot expect what they're going to do subsequent.
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Additional resources for Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market
With no order for the hunter-seeker radars to detect, it was easier to operate in stealth mode. But the hunter-seekers adapted to the new stealth techniques and watched for them, anticipating every move—even the seemingly random ones. Every trade left a signal, a trail of bread crumbs. The hunter-seekers were experts at sniffing them out. The mindless algos had evolved into dangerous beasts of prey. They were getting smart. They had names such as Shark, Guerilla, Stealth, Thor, Sniper. It was digital warfare taking place inside massive computers.
But now the Machine wasn’t working. Even worse, Bodek wasn’t sure why. That’s why he’d been up all night. If he didn’t solve the problem, it could destroy Trading Machines—and his career. What made the Machine tick was a series of complex algorithms that collectively reflected a two decades’ tradition of elite trading strategies. Bodek had personally designed the algos using a branch of artificial intelligence called expert systems. The approach boiled down the knowledge gained by experts in market analysis and crunched incoming market data in order to make incredibly accurate predictions.
Firms were reportedly dabbling in fuzzy logic and genetic algorithms, machine learning, and expert systems, all branches of AI. Bodek, an expert in all of the above, became convinced that he could use his vast skills to predict stock moves and make a fortune in the process. He’d also become engaged to Elizabeth and was looking for a way to pad his bank account. In the summer of 1997, he visited a Chicago-based recruiter for banks and hedge funds—private investment firms that make big wagers on behalf of wealthy investors—named Ilya Talman.