Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System is a “must listen” for anyone interested in AI, high frequency trading (HFT), complex event processing (CEP), cybersecurity, cyber SA, or electronic trading in general.
Even though it’s not directly discussed, Dark Pools does a very good job of explaining why big money goes into “offensive” profit-motivated research and development – AI, HFT stream processing algorithms, and machine learning – and why the big money does not go into “defensive” uses of the same technology such as cybersecurity and cyber situational awareness.
Before listening to Dark Pools, I was never been able to quite put my finger (definitively) on why all the big (and small) companies spend huge money on AI and machine learning because these technologies often do more harm than good, especially in the hands of those who are motivated by greed or political agendas. My career has always been focused on defending people and organizations against such greed and threats; but it is now very clear to me that cybersecurity-focused system engineers and “defensive” AI experts are fighting a losing battle against the “profit-motivated offensive tactics” to develop often hidden and secretive parasitic computing algorithms that have the sole purpose to make money off other people’s trading and buying habits.
Everyone has heard of computer viruses, these HFT algorithms are high tech parasites.
A parasite is “an organism that lives in or on another organism (its host) and benefits by deriving nutrients at the host’s expense.” In many ways, HFT is like a kind of parasite because it lives inside of the world of trading systems and benefits only from other’s trades, but in return to the “host”, the HFT parasites provides liquidity to the market. However, there are a number of side effects of this parasitic liquidity, including greed, volatility and instability.
This is a very good book; but in all honesty, the ending was very disappointing and could have been much better. However, I understand the author and his desire to document the past, which he did very well, and not to speculate into the future, which has yet to be written.