As technology evolved, the speed of execution went from minutes to milliseconds, and finally, to microseconds. Humans could no longer compete, leading to the rise of the "bots"—artificially intelligent systems designed to out-maneuver one another in a nanosecond, says the book summary from Shortform . 2. What are Dark Pools?
In response to the rigging, a new type of exchange emerged, famously documented in Michael Lewis’s Flash Boys : .
This public link is valid for 7 days and shares a thread, including any personal information you added. This link or copies made by others cannot be deleted. If you share with third parties, their policies apply. Can’t copy the link right now. Try again later. As technology evolved, the speed of execution went
While dark pools are intended for institutions, HFT firms often gain insight into these "hidden" orders. They can pick up clues about a large buyer in a dark pool and front-run that order in the public market, buying the stock first and selling it to the institution at a higher price [1].
A public comment filed with the SEC on the matter framed the conflict starkly: "The trading fund(s) and market maker(s) together are double dipping... The 'speed bump'... is designed to prevent the arbitrage from taking place in order to encourage true price discovery". What are Dark Pools
Many retail brokers sell their customer orders to high-frequency trading firms. These firms then pay to see the orders before they hit the public exchange, allowing them to trade ahead of individual investors.
Regulators have been slow to respond to the rise of machine traders and dark pools, and the associated concerns about market manipulation. However, in recent years, there have been a number of efforts to increase oversight and regulation of these markets. This link or copies made by others cannot be deleted
: Patterson details how artificially intelligent systems execute trades in milliseconds, often operating beyond the full understanding or control of their human creators.