JP MORGAN LAUNCHES NEW HIGH FREQUENCY TRADING ALGORITHM

The disconnect between genuine human market activity and that created by machines proceeds apace, for JP Morgan has just launched a new algorithmic high frequency trading algorithm, as this article from Zero Hedge, spotted and shared by Mr. B.H., states:

JPM Develops A.I. Robot To Execute High Speed Trades, Put Humans Out Of Work

The motivation, as usual, is the "bottom line," and maximizing profits while minimizing costly (human) labor overhead:

In the latest victory for robot kind over humans, LOXM’s job will be to execute client orders with maximum speed at the best price, "using lessons it has learnt from billions of past trades — both real and simulated — to tackle problems such as how best to offload big equity stakes without moving market prices."

In other words, one giant "big data" aggregator, using historical precedent to guide future decisions, which coming in a time when "this time it's certainly different" for the broader stock market, could be a big mistake.

“Such customisation was previously implemented by humans, but now the AI machine is able to do it on a much larger and more efficient scale,” said David Fellah, of JPMorgan’s European Equity Quant Research team. Mr Ciment said that, so far, the European trials showed that the pricing achieved by LOXM was “significantly better” than its benchmark.

The development guarantees another round of downsizing among bank front offices as increasingly inefficient human traders are removes from the equation... and payroll. As the FT notes, investment banks have been increasingly using AI, automation and robotics to help cut costs and eliminate time-consuming routine work. "For example, UBS’s recent deployment of AI to deal with client post-trade allocation requests, which saves as much as 45 minutes of human labour per task. UBS has also brought in AI to help clients trade volatility." (Italicized emphasis added)

It's precisely that italicized phrase (which I have emphasized) that caught my attention in this article, as the reader might well imagine, for "tackling problems such as how best to offload big equity stakes without moving market prices" has been, I submit, one of the major problems with high frequency trading algorithms, as exemplified by the various "flash crashes" that occur from time to time, beginning with the infamous May 2010 flash crash. The problem, of course, has been that these algorithms can, and have, "run amok", and caused market value of certain equities or commodities either to dramatically rise, or fall, within mere seconds, forcing shut downs of markets and price "resets," as I have blogged here before. The problem, as I saw it then, and still see it, is that these "resets" are costly, and will inevitably involve humans and human activity, and that, of course, adds to overhead costs.

But now, supposedly, JP Morgan has waved a magic wand of code, and one can now "offload big equity stakes without moving market prices." Let that one sink in for a moment... "big equity stakes" can be "offloaded" without any effect on market prices!?!?  Since when?!? The sentence, I submit, is a stunning admission of just how artificial, and unreal, these markets have become under trading algorithms. If prices are not affected by "offloading big equity stakes," then one of the key mechanisms by which humans determine their investment decisions - the price of an equity itself within market movement - no longer is reflective of anything humanly real. I don't know about you, but I don't want to invest my paltry $100 in a share of Twisted Trading Algorithm Partners, Inc.  when the price itself is being determined in part by an algorithm that will allow JP Morgan to dump, or buy, vast blocks of Twisted Trading (NASQUACK symbol, TT) without "moving market prices." Yes, that means I'd personally really rather have human traders on a floor waving papers and shouting hysterically at each other to conclude trades. And yes, I'll take a physical copy of that 1 share of Twisted Trading's stock, thank you very much.

Thank goodness sanity reigns somewhere, for Zero Hedge captures my own concerns with the vast expansion of "dark pools" and high frequency trading algorithms:

PM also said it had no risk management issues with the technology. “The machine is restricted in its trading behaviour, as it learns under, and operates within, our general electronic trading risk framework, which is overseen by internal control groups and validated by regulators,” Mr Fellah said.

Of course, with such rapid propagation of technology among both stock investing and trade processing, it is only a matter of time before a "black hat" hack takes place, and sends trading - and markets - haywire. Which, incidentally, may be among the reasons for the concerted push: after all what better way to avoid blame for what is coming than to blame it on, who else, Russian hackers.(Italicized emphasis added)

There you have the problem clearly stated. And I cannot improve on it.

See you on the flip side...

 

33 thoughts on “JP MORGAN LAUNCHES NEW HIGH FREQUENCY TRADING ALGORITHM”

  1. Robert Barricklow

    An excellent book out now[currently reading] on this is: The Last Hack by Christopher Brookmyre. In it the so-called bad guys(real hacker[not in it to steal] and a old-school journalist trying, to get a scoop [w/o selling his soul])are , in actuality, the good guys – caught between the Deep Blue Sea[the deep dark net black hat hackers] and the Devil[International Banking Cartel].

    About 1/2 way thru.

  2. Robert Barricklow

    Still reading article; but pulled away by various duties.
    Some crashes purposed; some not. But, It just don’t f*&#!^g matter; as my old boss used to say.
    Two prominent reasons being: as officers complying with BIS rules they are untouchable$, and in BKs[bailouts/ins] soon replaced, and/or their assets are immediately replenished[unlimited $$’$ from nothing keystrokes].

    Crime pays.
    Bots are more easily controlled or deleted.

    1. Robert Barricklow

      Regulators are caught between
      high-frequency revolving doors[DC/Private sector].

  3. Robert Barricklow

    Also, these bots replacing humans will eliminate the need to eliminate humans
    [at least there should be fewer
    in knowing deadly knowledge].

  4. “…how best to offload big equity stakes without moving market prices.”

    In addition to Joseph’s fears around usage, I would add that the Big Guys (or Gals) are getting set to cash-out before the next crash. For this to be successful, the sheeple must not see any ‘wavering’ by the bigwigs. So, I would suspect this algorithm is ‘tuned’ to stay below the radar while methodically-offloading the perps’ gazillions in paper-backed stocks (derivatives, gold shares, etc.) into physically-backed stocks (gold bars, manufacturing-company acquisitions, etc.). That way, when the bovine excreta hits the high-velocity windmill, they will just make ‘too bad’ noises and sip another brandy…

    1. Robert Barricklow

      Doesn’t matter if the public knows.
      The public’s real teeth are replaced by private wolves.
      As in animal farm; the difference between the animals
      is that between the powerful & the powerless.
      The private sector[private power/fascism] has eaten up public power/republic, to the point – that it has no bite…

      …Chew on that.

      Russia had Putin to put the bite on Yeltsin’s selling out.
      The US has no one to stop the presses[wolves].
      Russia’s experience w/wolves saved the day.
      Ours?
      Europe’s?
      Who else is on the menu?
      And then there’s the human weak link.

      Time to alter course.

      1. Robert Barricklow

        Please excuse my rant Goshawks.
        I’m not addressing you, just getting carried away with my anger at the continuous, ongoing usurpation of public power by private power.
        You & I are usually on the same page on many issues.
        Again, I meant you no disrespect.

        1. Robert, I know. No disrespect taken. I have a small pile of teeth-grinding-powder left over from reading the daily usurpations…

          (Take heart. When I first got deeply into David Icke’s ana lysis of the deep state [even neglecting the reptilian aspect], I turned to my partner and said something like, “Without higher-help, we have no chance.” Fortunately, in the decades since then, I have found much higher-help. Not from pleading to some nebulous sky-god, but from concrete-but-unseen forces. ‘Treaties’ have been made that have never-before existed. Cooperation in the most-unlikely manner. Remember that scene where unlooked-for Elvish forces showed-up at Helm’s Deep? It is somewhat like that. We are far-from-alone in this fight. And the baddies are starting to notice that…)

        2. robert – stop: from where/what/which is the seen manifest? from the unseen…i thought our systems were “bad” for a while until i realized i was looking at myself and projecting this onto all the forms/objects the light illuminates for the mind’s pleasure…the living mirror we incarnate within…

          The private is the public brother…the public only has one job, to protect private interests…that’s it…

          Perhaps a reason the private i seen as usurping the public is b/c ye do not know how to use that plenipotentiary private power thereby defaulting into a rather limited public hangout eh? Study the word game that controls all the other games including the money game…law…and claim yours…and give equity and you’ll get it in return…golden rules…rule 🙂

        3. Robert, There is no shadow without a fire – the very existence of a shadow argues a light somewhere {though we may not directly see it} It is the shining of the light that shadows are cast and the light falling upon the shadows reveals their negative character and dissolves them away. There is so much we don’t see but know it’s there like the natural cycles of earth. There is natures force that runs deeply in all of us.

  5. “To tackle problems such as how best to offload big equity stakes without moving market prices.” This means that there is no longer a market, but such price fixing is nothing new. [Anyway, key companies are not even listed on stock exchanges so the task of this algo is not all that great].
    The admission of fraud is outright. As C.A. Fitts says, when enough people no longer trust and “buy into” the system, that system can no longer work. When a critical point is reached (we are reaching it now) the intentionality of awareness will not be defeated by anything, whatever glowing, self-interested reassurances the worker-bee-technocrats provide to the queen bee.

    1. Robert Barricklow

      There is no price mechanism.
      This has also been a theme w/Max Keiser & Stacy Herbert.

  6. Our elites have turned living on this Earth into a game of Monopoly. Just wondering what these fools are going to eat and drink when they rid themselves of the rest of us useless eaters. Oh, they will upload their minds to machines but aren’t they machines already and stupid ones to boot.

    1. Robert Barricklow

      Competition is a sin.
      The robot’s competition,
      human labor,
      is hypothetically,
      becoming obsolete.

    2. Robert Barricklow

      OOps
      Com pet ti schzen
      is a sin here as well.
      [bots do not compute/com PETE humans]

  7. So, they have found the error in the algorithm and that pesky term “reality” has been removed. All is well, nothing to see here, move along…

  8. Then there is the NK threat. Faux News spent a lot of time yesterday trying to drum up support for an intervention. Charles R Smith published an NK hacking story describing their current joint capability.

    https://www.softwar.net/dprk.html

    I suppose we need to start watching the weather. If Hurricane Erin (11 Sept 2001) is any guide we might be see acts of MAN in nature preceding a huge financial and military storm on the horizon.

    1. Robert Barricklow

      …and whose war is it?
      The elites?

      Certainly ‘the people’ lose on ALL sides;

      while the bankster-type few powerful elites
      on all side$ -profit!!!

      at, again,
      the expense of the too many powerless.

      – History’s WAR Rhymes,
      again & again.

  9. The G5 rollout must already be done in all political arenas and important boardrooms and be working flawlessly. I am more worried if one can resist and be immune to that radiation.
    The clock of freedom is ticking loud and making me nervous.

  10. The money changers will stop at nothing. They are implacable, relentless. Every last minuscule mote of profit will be theirs. They will not be denied. And they wreck in doing so.

    A plague upon the earth.

    1. Yeh.. apparently the last guy who kicked the money lenders out of the temple ended up being nailed to a tree..or cross.. The details and any first hand source material are a little blurry and fuzzy..

      1. Phil the Thrill

        I thought the “last guy” was a bit more recent; instead of being nailed to a tree, he took a ride in a open-top car…and ended up with an open-top head. However, as in the earlier incident, details/first hand source material remain blurry (see G. H. W. B’s apparent inability to recall his whereabouts on that day)

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