A futuristic Stock Exchange

Looking at my crystal ball and from the inputs of what are being implemented in the western model of stock exchanges, I have this vision of what the future stock exchange will be like. As desired, it will be a state of the art computerised system with minimal human beans involved, and superbly efficient.

In short, traders and remisiers can be excused from the system. They will not be able to compete with the machine. What will evolve will be high speed trading by computers and machine. Every big fund will roll out its state of the art computer system to trade for them, programmed by the best programmers applying the most complex algo logic to profit from every trade. To make a winning trade, they only have to beat the rest of the competitors by a micro sec faster or by a bid of 0.1c. That is all it takes. It is not about investing but a battle of machine. No need to bother about fundamentals or real values of the stocks. And all these will be done at extremely high speed by the supercomputers.

The game will be so sophisticated and super fast that no retail investors/traders will be able to play, or to think of making a profit. They will all pack up and call it a day. Trading houses too will not be in business when there are no investors/traders to pay them the commission to cover the operating cost.

Companies and business organisations too will find listing meaningless as the stock prices will hardly move, controlled by machine to minimise risk and making brisk profits in micro seconds and with marginal changes in prices. With the high cost of listing and listing fees, and unable to raise funds in a virtually lifeless market, many will delist from the stock markets.

Then what will the machines be trading? Derivatives, ETFs, CFD, ADRs, covered warrants, or any kind of papers that the funds could generate for the market. There will be virtual stocks created just for trading, with no need for a company and a profit generating business. A typical trading pattern for a penny stock like R2D2 will be: Buy 200m at 1c and Sell 200m at 1.1c. Or the higher value stock like C3PO Bank: Buy 20m at 8.00 and Sell 20m at 8.01.

And the industry will be so efficient that the management of a stock market would need not more than 20 staff. And the fund managers too will be operating with a handful of staff manning computers and machines. The whole industry could comprise of less than 100 expert financial professionals.

The broking houses will be a thing of the past, so are remisiers and traders and real stocks. It will be a real virtual world of stock trading, with stocks from non existent companies and machine trading for non existent traders and investors.

And the stock exchanges can churn in several trillions of trades daily from the handful of big operators and their machines. The stock market and exchanges of today will only be remembered and taught in schools as part of the syllabus in the subject called History.


Wally Buffet said...

Let the idiots play their doomsday games.

I am going back to farming and be one with nature.

Next to my palace is a big plot of land where I have plans to raise chickens, plant veggies and graze cattle and lamb. Wine making from the grapes I grow will also be a new hobby.

When the whole god damned system collapses and everyone is a pauper, I will come out from "retirement" and pick their bones like patient vultures.

Meanwhile, I would, in the friendliest gesture of fraternity advise you to take up a less self defeating occupation such as running a durian plantation up North.


Chua Chin Leng aka redbean said...

Don't worry, preparing to retire and spend my time in the casinos: )

Wally Buffet said...

Good choice but I'm afraid I've bad news for you.

They are now developing a near perfect humanoid robot with zillions of computer chips implanted in its head that will be able to calculate and compute the odds in its favour scanning the body language of all the other gamblers around it. It will also be able to predict with stunning accuracy the number of swings of the arms of the one armed bandits before the clangs and siren of the next million dollar jackpot payout!

Casinos as we know it is going the way of the stock exchange, as we know it.

Welcome to the new era of computerized money making.


The said...


If your futuristic scenario materializes, you will have exactly ONE trade, or ONE DAY of trades. The minute the super-efficient computers make their first set of trades, all inefficiencies will be gone - there will be no more opportunities for arbitrage. Zero inefficiencies = zero trade. You can kiss all those tens or hundreds of millions invested in the super computers good bye.

Chua Chin Leng aka redbean said...

Glad you see the beauty of the system. The computers will run efficiently and nothing else need to be done when a perfect equilibrium is achieved.

Anonymous said...

Mankind will be destroyed by his own invention, unfortunately it will not be a one go for all.
The destroyers will destruct segment by segment and make the deaths a slow and agonizing process for their inventors and users. And the MOST AGONIZING ONE, IS THAT THE INVENTION WILL DO ITS' DESTRUCTIONS BEFORE NATURE DOES.