Controlling Risk (or "Skynet Becomes Self Aware")

I was reading this blog which is quite funny, and realized that my blog is not so funny. I am not sure why this is, as I am clearly a very funny person. I saw some statistics the other day about how people describe their blogs and the highest rating was for people who describe their blogs as “sincere”. Not: “funny”. At least I am not alone.

I bought a new laptop finally.  Sony Vaio, 6Gb RAM, Solid State Drive, wide screen, HD.  Most important it looks cool, which is a key determining factor in long term enjoyment ... of so many things!

Which links to an article this morning by the Federal Reserve on Algorithmic Trading and "High Frequency Trading", which is where banks use computers (like the one above, which incidentally is not an algorithmic trading computer but a Japanese receptionist robot for firms that dont want to pay for a human, but it is an example of a com-pu-ter) to track miniscule (or large) abberations in the global stockmarkets and then trade heavily and at lightning speed to arbitrage a tiny window of opportunity on that delta before it closes.  This can all happen in less than the time a human could touch their keypad.  The 2% of firms engaged in High Frequency trading could be contributing up to 70% of the worlds stock market liquidity.  They need a lot of very fast fibre optic networks and very clever computers (and very very clever highly paid people to operate the computers) to do this.

Any case, the part I liked was the below (when the Federal Reserve talking about risks and how quickly these could spiral to a very large scale problem):

For example, in 2003 a U.S. trading firm became insolvent in 16 seconds when an employee who had no involvement with algorithms switched one on. It took the company 47 minutes to realize it had gone bust and to call its clearing bank, which was unaware of the situation.


Can you imagine, the cleaner, in the communications room, looking for the switch to turn the vacuum clearner on...........  oops!