Speaker: Jonathan Cave (University of Warwick)

Title: Computer trading in complex networked financial markets - self-organised regulation or an unending sequence of crises?

Abstract: In recent years, the intensity and pervasiveness of "light touch" trading, involving little or no human intervention and at quite inhuman speed and scale, has escalated rapidly; this has led to a range of well-known phenomena, such as the Spring 2010 "Flash Crash". The session will consider the complexity aspects of this issue. First, we will discuss the nature and phenomenology of unforeseen and often undetectable qualitatively novel emergent phenomena, and the critical roles of trading programmes, semantic algorithms (which select from the deluge of data those to be used in trading), communications networks and the variety of models, trader types and strategies that inhabit this space. Second, we will analyse the behaviour of the system and its consequences. Third, we will consider the two-fold challenge facing regulators and policymakers. Finally, we will pose a broader set of questions about how to deal with cybernetic (machine-human) systems and in particular situations where the technical characteristics of the ICT system (e.g., transmission speed, latency, jitter and computational complexity and stability) interact with the competitive dynamics and (in)efficiencies of markets to produce new hybrid phenomena.