With the markets already weakened by the LIBOR Scandal, they found themselves facing a new problem, computers. Major firms across the globe have utilized high-end software for a process known as rapid frequency trading. Computers tabulate and trade on microsecond levels, too fast for human intervention. A glitch in one system which handles transfers for 150 different stocks at the Wall Street firm Knight Capital caused severe problems in the marketplace. Only prompt action from the brokers on the floor prevented the glitch from causing a complete market meltdown.
Many investors dislike these computer controlled trades, such as Kingsview Capital managing partner Phil Silverman, who is quoted as telling CNBC:
‘This algorithmic trading is kind of out of control. It seriously hurts investor confidence.’
You can see portions of his interview and the full report here:
But, these financial heroes are an endangered species as fewer and fewer people actually engage in direct trading. The further reduction, and eventual elimination, of people from control of the market makes the chances for a similar glitch in the future being caught in time less and less likely. And then, once that happens, our financial well-being will be taken hostage by computers that no person fully understands running software no single person can comprehend.
Then will people be in charge of their own destiny at all, I wonder.