In the wake of the Knight Capital’s trading glitch last week, a bunch of traders have been passing around this lecture about High Frequency Trading and the new algorithmic ecosystem given by Dr. Sean Gourley, a physicist and CTO/co-founder of Quid.com, at TED a few months back.
“…This ecosystem has optimised for speed. As a result, they all end up pretty damn similar and when you have a bunch of species that all look the same you end up sometimes in catastrophe. It crashes,” Gourley said. “These things are not stable because they’re not that smart.”
Check out his explainer of high frequency trading below.