Computer Algorithms, Market Manipulation and the Institutionalization of High Frequency Trading
By Jakob Arnoldi. 2016
76 citations recorded by the source corpus.
The article discusses the use of algorithmic models in finance (algo or high frequency trading). Algo trading is widespread but also somewhat controversial in modern financial markets. It is a form of automated trading technology, which critics claim can, among other things, lead to market manipulation. Drawing on three cases, this article shows that manipulation also can happen in the reverse way, meaning that human traders attempt to make algorithms ‘make mistakes’ by ‘misleading’ them. These attempts to manipulate are very simple and immediately transparent to humans. Nevertheless, financial regulators increasingly penalize such attempts to manipulate algos. The article explains this as an institutionalization of algo trading, a trading practice which is vulnerable enough to need regulatory protection.
Subfields: Finance, Information Systems
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In Finance
In Information Systems
- Rob Kitchin
- Mike Ananny
- Kate Crawford
- Tim Christiaens
- Jack Stilgoe
- Robert Wilhelm Siegfried Ruhlandt
Citations in the corpus
- Thinking critically about and researching algorithms (2014, background): “Similarly, Lenglet (2011), MacKenzie (2014), Arnoldi (2016), Pasquale (2015) document how algorithms have deeply and pervasively restructured how all aspects of the fi nance sector operate, from how funds are traded to how credit agencies assess risk and sort customers.”
- Seeing without knowing: Limitations of the transparency ideal and its application to algorithmic accountability (2018, background): “…(Mackenzie, 2015; Striphas, 2015), automated media circulation (Hallinan and Striphas, 2014; Napoli, 2014), optimized labor (Kushner, 2013) and financial markets (Arnoldi, 2015), bracketed research methods (Driscoll and Walker, 2014), and rationalized expertise (Anderson, 2013; Levy, 2015).”
- Digital subjectivation and financial markets: Criticizing Social Studies of Finance with Lazzarato (2016, background): “However, this view obscures the fact that, just like human beings, computerized algorithms work on the basis of assumptions that may not always hold (Arnoldi, 2016).”