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Friday October 31st 2014

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Electronic Bulls, Bears and Pigs: Predicting the Next “Flash Crash”

By Hazel Henderson

Remember the old Wall Street adage, “Bulls make money; bears make money; pigs go broke!”? Today, not so much.

Pigs often win, particularly those armed with computers and algorithms. Speed and complexity are the tools of those seeking alpha, hiring quants to create ever more complex derivatives and optimize mathematical paths to trading and gaming markets. Another adage was that of “shearing the sheep,” (i.e., small investors).

Fleecing Small Investors

Computers arrived on Wall Street in the 1960s with early electronic markets like Instinet (now owned by Nomura) and AutEx (the first offering for block traders, now owned by Thomson-Reuters).

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