Out of our hands: the hidden dangers of high-frequency trading

Sharemarket trading is now mostly out of human hands, thanks to algorithimic programs. AAP

Stock market trading has been transformed over the last two decades in ways that are fated to increase the likelihood of complete market collapse.

Stocks used to be traded by human beings through shouted buy and sell bids (the “open outcry” market).

Trades could only be made when the exchange was open; records were kept on paper. Today, every element of this has changed: trading decisions are “roboticised”, buy and sell orders are made by powerful computers according to the proprietary algorithms that hedge funds and investment banks have programmed into them.

Record-keeping is computerised and trades are made any time of the day or night. Because computers can respond more quickly than humans, electronic trading platforms have cut the time required to complete a trade to mere milliseconds, which in turn has caused trade volumes to soar.

The open outcry market has been superseded. AAP