In the view of Chicago Tribune Company: It was not subtle. It was not pretty. And yes, it felt mechanical. When the robots came a callin’, it felt like mathematics came and stomped the very soul out of the market.
The robots were computers that enabled high-frequency trading, the rapid buying and selling of stocks and other financial products using automated algorithms. The practice now dominates the financial markets, including the Chicago Board of Trade and Chicago Mercantile Exchange. That’s where I traded futures while I worked for Chicago firms like Gambit Trading.
High-frequency trading has been blamed for “flash crashes” and for August’s three-hour screeching halt at the Nasdaq. In September, regulators convened to outline proposals aimed at reining in automated trading. I’m not making any claims about whether this trading is of benefit to society or improves market functioning. I simply aim to give an anecdotal and experiential account of what I saw in my 10-year career.
When I started in 2004, Chicago was like a Wild West town. There were the old cowboys who had been bootstrapping it from the beginning (local small traders). There was a town barber and haberdashery (assistants and others necessary to grease the wheels of general operations). There was a town bank (the stock and bond exchanges and clearing firms). There was the railroad (the biggest banks and trading firms controlling the major market flows, i.e. the Goldman Sachs types). Then there were the young guns looking to take a piece of the pie.