Facebook IPO owned by bots
Facebook’s recent initial public share offering may have tempted many people to make a first foray into the stock market. However they probably did not realise that in so doing they would be stepping into a theatre of digital battle, dominated by leviathan trading bots, where no human could possibly hope to compete.
High-frequency trading (HFT) (or flash trading) is a practice which employs extremely complex, intelligent software algorithms to make decisions and execute trades automatically, in huge volume. These HFT bots are often built to emulate the thought processes of seasoned investors, and can even subscribe to specially designed market newswire services which feed them market updates in a form they can digest: pure data, masses of it. Although the technology is still relatively new, high-frequency trading already accounts for a massive 73% of all equity trading in the US.
When Facebook’s virgin stock entered the equation, swarms of trading bots were ready to pounce on it, and the scene was set for an epic battle. On one side were Facebook’s IPO underwriters, the large banks determined to prevent the price dropping below the IPO price of $38 per share; having predicted this, predatory HFT bots were eager to accumulate huge volumes of stock at this price, so the could sell it all again automatically at a marginally higher price when it inevitably rose moments later. Take a look at the amazing speed of these exchanges in the video below (preferably with some suitably epic battle music in the background), and you’ll understand what a financial swordfight in cyberspace looks like.
When Henri Maillardet made his amazing vintage automatons in the 19th century (as featured in our last post), could he have possibly imagined what power their disembodied descendants would one day yield?
Video and more info from Buzzfeed