Saturday, December 22, 2012

Open trading and the chimera

Moral: Wherein we stop to consider why 'chimera' might come to be. Things, in the exchanges, are booming because Ben continues to sack the savers and to give to the money'd set.

The 12/21/12 WSJ had an article (Open Trading Still Hallmark of a Fair Market) that quoted some who have been involved in trading prior to the advent of the more automated means. The article says: Many in the securities business would ... [maintain] that electronic trading and computers have made the business cleaner, more efficient and less prone to abuse.

I would maintain that these ones (the above 'some') are those who benefit from the new methods and are not those who are involved with the technical details. Let's take each of those and consider their belief.
  • cleaner business - There is less shouting, saliva spitting, and such. As well, the floor isn't covered, at the end of the day, with cast-off trade sheets and notes. The underlying basis, though, is very dirty, about as opaque as are the dark pools (representing almost 1/2 of the trades, daily) that some of these people love so much. When it comes to computation, things are more hairy than we allow ourselves to recognize (see FAQ at Princeton). There are those who manipulate the game (markets, et al) through knowledge that the underlying complexity will most likely shield their introduction of 'lemons' despite efforts by the vigilant to prevent such gaming of the system. 
  • more efficient - Trades can happen at the blink of an eye, and less. That is, when they're let go (you see, pre-looks hold things up until the manipulator figures out a paying position), trades happen fast. Yet, there is no accounting daily. How can there be when derivatives are piled one upon another? Too, those dark pools aren't giving us any accounting that is worth  much at the end of the day.  
  • [image]
    WSJ 12/21/12
    CSU Archives/Everett Collection
  • less prone to abuse - This is almost laughable if one considers lemons which are easier to foster on the investor and the public under the automated means than in any other way. The stage is being set for major exploitation of the markets far beyond what we believed was possible. 
---

One ought not complain without having a solution. I have one and am ready to stomach the demands. Briefly, it would go like this. 
  • First of all, accept the reality of complexity (see FAQ at Princeton). The cards are stacked toward those who want to game the system (we'll gladly go through the history of this). 
  • Let the boys and girls play, but they have to account every day. Yes, the system doing the checking would be expensive, but, hey, it's just a matter of bringing the 'real' costs out (as in, seeing near zero for what it is). 
  • The checking system would be run in a non-profit sense with people who are smart and not after unworthy gains. Yes, there are plenty of these, folks. 
  • Have regular snaps of the entire system (of course, a quiescent point is necessary) with which ex post facto studies will improve the foundational issues. 
  • Quiescence? Possible? Yes, recently there were two days down. Post 9/11, there was an outage. We can schedule these. Then, we can turn loose analysis (actually, jobs, folks) to look for mischief. 
As I said, briefly. Taking this further awaits only the proper attention and emphasis. In the meantime, I'll continue to watch for the eventual move toward this type of oversight.

Remarks:

01/15/2013 -- Force quiescence on the thing, regularly.

12/31/2012 -- The high-frequency people are trying to get themselves seen as necessary, even beneficial. The prime benefit is to those who run such, since they're able to pull off from the top. What we need, actually, is some type of quiescent period, often (daily?) during which snapshots and analysis could be done.

12/27/2012 --  Businessworld graphic on the new market

Modified: 01/15/2013



Wednesday, December 19, 2012

Summary, 2012

Moral: Wherein we take a look at 2012.

The blog got its start in August of 2009. As of today, there have been 165 posts with 22 categories.
Past 30 days                               All time
The image shows two lists of the most-read posts, for the Past 30 days and All time.

  • Of late (Past 30 days) - Secured payments in which we consider that there are problems with regard to supporting on-going payments or to obtaining such in the future even with all of the techniques that are available in a modern economy. The age-old urge to misappropriate from others may be one of the factors needing attention.
  • Since the beginning (All time) - Computation, finance and engineering is an early post that quotes from articles in the Communication of the ACM which is the voice of an organization dealing with the technology of computing. In other words, there are issues that we have learned, yet, to address. Given such, some of the chicanery behind failures to pay may be hidden under the guise of computing which is trusted more than it ought to be, perhaps due to its complexity. 

The count of posts by year has been the following: 2009 (57), 2010 (40), 2011 (43), and so far in 2012 (24).

Remarks:  Modified: 01/02/2014

01/02/2014 -- Summary for 2013


Wednesday, December 5, 2012

The firm, and theories thereof

Moral: Wherein we just quietly nod to Ronald Coase (via Bloomberg's Businessweek).

He is 101 which means that he's been around for awhile. We need to consider his ideas, such as The Nature of the Firm, and to re-look at the earlier posts (Corporation, Corporation II) here in which we considered, briefly, the entity whose person-hood was established by the Supreme Court. As well, his take on quantification's grip, and the other than beneficial effects from the grip, does correspond, somewhat, with my own: Quants, et al.

Remarks:

07/31/2013 -- Ben cannot unwind or taper downhe has too many Doves. We'll have to get back to the king thing (yes, the divine rights of the CEO) and dampening of these types by a new outlook (Magna-Carta'√≠sh). By the way, if the company is a person, how do we jail it?

12/15/2012 -- We need to get back to thinking about the firm. It's given some type of "divine right" by some views (to wit, the Supreme Court's decision concerning the corporation as citizen). Kings took that notion (we'll have to look at this, to boot) for themselves. Evidently, the CEO represents the corporation, as if all is embodied in his/her self (sarcasm). Consider (partly motivated by reading about Thomas J, the slave owner, who allowed mistreatment, yet had his head in the clouds -- thank God he was not the first president as we would still have a king -- we cannot thank George enough for stepping down, --- the modern economic situation abounds in indentured slavery (oh yes, couched otherwise) -- and, Thomas would not listen to Lafayette on the matter):
  • Firms have an evolutionary, social nature and purpose. The people who work for any firm (yes, the rank and file) have as much right as do those in whose hands are all of the decisions and the assets (yes, including stockholders). It's the workers who provide the value (that sight morphed to idiocy in the latter part of the 20th century). ... Hence, getting to the basics, corporations (a type of firm) ought to have serious civil, social impediments against ill-behavior (such as, indentured slavery, bullying, ..., pollution, ..., out and out juvenile behavior, ..., et al) that are actively enforced. And, the whole thing would be coordinated across national boundaries (how?, ... ). Remember, people, capitalism built itself upon the backs of slaves and other workers (then claimed that some invisible hand was its chum - silly, indeed). 
Aside: Thomas, evidently, had kids by slaves. Then, he sold them off. Can anyone tell me any reason that we ought to hold this guy in any type of homage? Oh, great writer? We're still arguing about the issues. Kings, of course, had their illegitimate offspring (one example). Yet. many people today (even royals) descend from these folks who were, many times - not always, acknowledged by their sire as their progeny. We also know that people in economic stress sell off their kids ("sell off" has a general meaning, to boot, putting them out to hard labor, etc. -- our culture tries to get away from that, made a lot of progress at the turn of the 20th century), and we can cringe as we think of this type of behavior (by the way, farm labor on private farms is not, by definition or necessity, this type of thing). What was Thomas' excuse? 

Note one of Coase's counsels to the dismal scientists: get away from the efficient market theory (hypothesis that it is -- we'll get back to the subject).

Aside: We could argue that any accumulation of people spawns some entity (of course, the CEO thinks that he/she represents/manifests this?) that ought to have types of rights. And, these may even, in the accumulation, be more than is allowed to any individual (except, again, the star CEO?). But, science denies such types of things, as of yet. The legal profession may hint at something that needs attention (of course, the theory (and a very rational basis for such) behind such phenomena is not outside our preview, folks).

12/13/2012 -- Don't know how long this page will be there, Daily Ticker. But, when I looked, 69% had said 'no' (hurt rather than helped) as to whether Ben has helped.

Modified: 07/31/2013