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The Revenge of the Geeks

Traders Magazine, September 2004

Randy Abernethy

Automated market making, black box proprietary trading and algorithms are rapidly growing segments of the trading industry. The implied migration from people to machines will have a profound and long-term effect on our capital markets. A few years ago, market making was a task doled out to tens, sometimes hundreds of people on boisterous trading desks. Today, the most profitable market makers are silicon, rather than carbon based. Technology has revolutionized the way the bulge-bracket firms trade their own money. Quantitative strategies operated by hedge funds and the proprietary arms of broker dealers have grown tremendously in sophistication.

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