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ROBOTRADING: A DISCUSSION THAT IS NEEDED, AND SOME SPECULATIONS: PART ...

August 8, 2012 By Joseph P. Farrell

Yesterday I talked about high frequency trading, or algorithmic trading, or what I prefer to call "robotrading" for reasons that will, I hope, become clear in this little blog. And I ended on a note yesterday that indicated that there was a possibly darker, murkier side to the phenomenon, one that invited discussion and speculation. Well, yesterday was the discussion, and today is the speculation.

The phenomenon of high frequency algorithmic trading immediately opens up potentialities for cyber-warfare, sophisticated computer programs deliberately designed to play havoc with a commodities or securities market, where the smallest movements in prices within mere seconds can be programmed to trigger pre-preogrammed trades. Such potenitalities could be exercised by a foreign nation in a form or economic warfare, or by private corporations, cartels, individuals, or political groups such as "Anonymous", criminal syndicates and undergrounds, i.e., by virtually anyone with the computer savvy, the financial backing, and ability to penetrate trading networks. As such, these potentialities constitute a national security threat, and thus, we may rest assured that they are already under study, as well as their countermeasures.

Indeed, it does not take more than a cursory internet search to see that such security issues have been a subject of concern to intelligence agencies such as the National Security Agency, DARPA, and to public-private think tanks and discussion groups. Cyber-warfare has become a component of the military's offensive and defensive thinking in its quest for "full spectrum dominance."  All of this implies that the necessary hardware and software to monitor markets and financial transactions has been in place for a long time. We may assume, for example, this this, and probably other, governments have programmed--in backdoor access to interbank transfer networks such as SWIFT and CHIPS, and probably have similar capabilities with respect to central banks and larger commercial banks.

We need only remind ourselves, for example, of the INSLAW scandal and the theft of its PROMIS software, a database management system being developed by the INSLAW company for the Department of Justice, but which, according to the story (and I believe it), was stolen and then modified, with programmed backdoors, and then marketed as a database management program to foreign nations. One potential of this software was its ability to monitor financial transactions (so, when the government tells you they don't know who profited, for example, from the strange trading before 9/11, quite simply, they're probably lying).

It is all these possibilities that open up yet another layer of artificiality to current markets and trading, for it means that they are, at the minimum, probably deeply penetrated by intelligence agencies. It stretches the imagination, for example, to assume that the NSA's or Britain's GCHQ's massive electronic eavesdropping and data-mining do not include searches for key corporations, and types of trades and computer commands. The possibility includes the ability of these agencies to manipulate markets in their national interests. This raises yet another possibility, already hinted at, that factions within such agencies may indeed be working counter to their various nations' national interests, and for more narrowly construed private or corporate, or even class, interests.

As we penetrate the speculative possibilities even further, further potentialities arise, one of which we may call simply the "transhumanist market," a market where brokers are comprised of the human-machine "cyborg interface" that has endeared itself to so many transhumanists, yet another step that would make such high frequency trading accessible to an even narrower group of people. Commodities and securities markets could become, in effect, another tool in the cultural transformation of the age, and literally function to drive that change.

And at the deepest level, there is a potential nightmare that one can only assume is keeping the midnight oil burning in some black projects agencies. High frequency trading -robotrading - by the nature of the case not only requires complex algorithms, but also multi-faceted multi-layered computer networks, handling literally billions or trillions of trades in ever shorter periods of time, to ever greater amounts of value. The science fiction community has long speculated - and the 'futurist' industry has not been far behind - about the possibility that such networks might suddenly "switch on," and artificial intelligence be born. At this juncture, the market would resemble human markets and requirements the least, and yet,could potentially reduce humanity to a hitherto-fore unseen dependency.

All of this, I submit, returns us to the urgent need for a genuine discussion on these matters, for the plain fact of the matter is that merely demonizing the banks or the corporations - as so many within the occupy movement ended up doing - or demonizing the opposition as socialist or luddite, or what have you, simply is missing the point. The technology, here, as elsewhere, is driving new potentialities and redefining almost all aspects of human culture and interaction. Excluding this or that party from the discussion would be as counter-productive, as not having it at all.

See you on the flip.