Algorithms Out of Control?
Traders Magazine, March 2005
Progress always has its downside. Algorithms, when used properly, indisputably reduce transaction costs. These mathematical marvels can lead to better executions. However, flawed algorithms - in a nightmare example of math made too simple - can also be read by trading sharpies. They can read the patterns of some algorithms and front run. "There's a lot of fear that reverse-engineering and pennying problems are causing people using algorithms to incur greater costs than they normally would," says Ben Sylvester, senior trader at money manager David L. Babson & Co. "You have to be cautious about how you use algorithms." However, the algorithms of recent times are not an accident. They are a
All TradersMagazine.com articles are archived after 7 days. REGISTER NOW for unlimited access to all recently archived articles, as well as thousands of searchable stories. Registered Members also gain access to exclusive industry white paper downloads, web seminars, online technology directory, the iPad App, and conference discounts. Qualified members may also choose to receive our free monthly magazine and any of our e-newsletters covering the latest breaking news, opinions from industry leaders, developing trends and trading strategies.