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BATS Stock Exchange IPO Rogue Algos–Attack of the Killer Algorithms Chapter 25–See How Other Killer Algorithms Occur

Posted Mar 26 2012 1:15pm

If you haven’t figured this one out yet, it’s about computer code and “rogue” algorithms and this can happen at any time, any place and so forth.  Most all in tech know that even the best engineers cannot predict when and where but they do image happen and you can reflect back on the big Amazon cloud disruption that took place last year.  We don’t like it of course but it’s something we have to live with and the folks at BATS were smart in shutting it down immediately and not seeing a a self heal function would take place.  In addition, the circuit breaking “code” algorithms kicked in, which is a good thing.  Smart engineers made the right decisions at BATS and they will have to regroup and make their come back.

This is just one example on how we as consumers are all at the mercy of the Killer Algorithms at some point in time.  When you have servers running 24/7 making life impacting decisions about you that you can’t see, touch or talk to, it is frustrating for sure.  In healthcare, insurance companies live and die by their algorithms which analyze information and categorize almost everything about us. 

The big problem today is “flawed data” gets in there either by accident or by human error, or by a rogue algorithm.  Below is a digest of links and a great video that debunks a lot of the reports and methodologies used at times and how some of the marketing for profits created “designed” algorithms that specifically move money and you don’t even see it. Context is everything today and when we roll in some big data and we have some flaws in the integrity of what gets rolled in, then sometime we can’t see the bottom or the top.  Ever wonder why it takes so long to get errors fixed?  Some folks don’t update frequently enough too.  You just never know when the algos are going to bite. 

This also looks like a good spot to repeat the TED video from Kevin Slavin who talks about how algorithms shape our world.  If you have not seen this video, take a look now at this mini crash and see how Nanex and other companies study these rogue algorithms to find out how the machines with no input do a lot of this.  It’s machine talking to machine and again when human is in there with potential flaws, time to pay a little attention here.

“It’s a bright future if you are an algorithm” but we can’t say the same for humans right now.

This is a good time for me to repeat a link to a post I made 2 years ago and I think we are almost here in needing a Department of Algorithms or something like it very soon.  Business trumps government every time when it comes to algos for profit sadly.  BD

“Department of Algorithms – Do We Need One of These to Regulate Upcoming Laws?

Not only has BATS CEO Joe Ratterman released a letter to investors and clients, when you visit the Lenexa, Kansas firm's web page , you have the option of downloading a PDF explaining what caused the meltdown. If this self-inflected wound weren't damaging enough, the BATS meltdown also drove down Apple's stock price an estimated 9 percent with it before the circuit breakers kicked in.

The BATS IPO auction system glitch played a role in an issue resulting in the halting of Apple Inc.'s stock for five minutes. Three erroneous prints occurred that triggered a single stock circuit breaker for the AAPL ticker. Normal trading in AAPL resumed after the five minute trading pause and the three erroneous trades were later broken.

While it was unfortunate that our issues impacted another security, the industry's single stock circuit breaker system worked as planned and proved that recent improvements in U.S. equity market structure are working as intended.


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