Technology has a way of being disruptive.
I mentioned some little gadgets from Fusion-io which can turn your desktop screamer into a 2TB 1 Gigi per second screamer. Some of the server arrays out there with optic networking are providing surreal performance and it seems, surreal profits.
I notice that I haven't been the only one into the speed machines. Algorithmic trading has
scaled new heights, perhaps reached it's zenith. It's probably getting close the point of being counterproductive for the traders, and has already passed that in the context of the wider market.
Are we approaching a point where we see a small group of rival speed machines jockeying for micro-positions and feinting at each other in an attempt to achieve an ever narrowing margin?
I'm sure it seems like a good idea, and it certainly makes money for the early movers, but I'm not sure it adds value. It may be taking all the value out of the market for anyone but the machines.
What will be the result? Fewer direct investors in the market? Day traders reduced to gamblers, without any ability to react to the market meaningfully (profitably) no matter how good their knowledge, because they'll be spotted and gazzumped my microseconds
and forced to pay more /make less. Will it drive all small investors out of the markets altogether?
It can't go on indefinitely making profits at everyone else's expense.
How long before small investors return to the markets? After the crisis and endless revelations about dodgy companies, banks, brokers, investment advisers - will this, the end of any semblance of a level playing field in the market be the death knell of
the stock market as we knew it?
Would you buy shares if you knew what you were really up against?
What will it do to the markets?