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Scott Patterson on how stocks are now being traded through artificial intelligence & outsmarting humans.
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Scott Peterson.
Veteran reporter with the Wall Street Journal Paterson sorry.
And also.
The author of dark pools high speed traders.
Bandits and the threats to global financial system.
Thanks for coming on thanks for having an -- so let's try to explain.
What -- dark pool list of people out there.
Right so.
You have the regular stock market like the New York Stock Exchange -- everybody knows about them but over the past ten years or so.
Electronic traders have taken over.
These markets the public markets and they totally -- Interrupt you for a -- except.
When his seat in New York Stock Exchange on TV and CNBC is down there and Fox Business Bloomberg and CNN near one there all down there looks busy through its.
Volume is dried up everything is happening on the Internet right it's an illusion TV studio in many -- Exactly I was I was on CNBC couple weeks ago I made an -- education dad and I said this is kind of like it does studious now.
The dark pools are where the big trading firms are going to hide.
From those computers.
And what I've discovered is really -- they're very secretive.
Deprive it.
Nobody really knows what's going on behind the scenes there but they regulated their very lightly regulated behind any regulated now island as credit.
Yeah well I think that's true but they're disrupting system.
Well the dirty little singer of the dark pools is the computer traders are there too so basically -- founders there's nowhere to hide anymore.
What that's not.
A -- is a term I'd turn around in this book dark pools for these computer traders.
Home -- -- because they.
Actually use artificial intelligence to.
Detect patterns in the market.
What it meant in the title of your book NAI bandits -- -- -- -- Got it wouldn't let me do right.
This -- Well I was working at the Wall Street Journal couple years ago and we have this event that we call the flash crash.
So yeah I was may -- -- -- basic 2000.
While Democrats can you explain that what analysts are viewers so the market fell about 10% and a -- a matter of minutes and basically is because these computer systems went haywire and all across the country.
And I reported on that for the journal for several months I learned to live in -- realize that nobody really knows what's been going on.
And I'd side you know maybe I should try to explain it to people this is what our market is now it's not guys in the -- swapping stocks its computers.
More hand signals -- events are allowed gorilla that's.
And it's -- happening online and then in places online and we don't even.
In new about.
From what.
What -- regulators.
Who who would regulate this is -- yes I think this'll be the SEC and they've actually that hurts us.
Thinner as well thinner is.
-- regulated by the SEC so the SEC really is in charge of trying to keep this stuff under control they've been trying but I think that.
They've really dropped the ball they've been left behind and they've really have no idea what's going on since then the market as dark as well.
The SEC kinda has to police everything these days -- have enough manpower to do that.
And you're blaming the SEC when it came to Madoff network blaming Nancy with that we're always looking SEC rightfully so in many cases -- -- but they don't have the manpower to deal with us.
Right so we now -- -- proposing a big computer system of their own to attract this and I think that's really good idea.
And the SEC actually just approved the system called the consolidated audit trail yesterday -- -- -- they're they're making an effort to to do it yeah and that's a good move.
BI thinks -- called the cat.
The cat -- more terminology per -- and I -- and your cat yeah all right that's how lucky gets so complicated though.
How does this happen -- sunshine earlier appealing to us again.
Well in a way you have to blame good old fashioned human greed.
In the ninety's there is as big scandal at NASDAQ where all these market makers are being basically ripping people off him.
These are guys on phones and the SEC's.
Clamp down on them and opened up the market to computer traders.
The computer traders actually ended up being a lot better and doing their job and they got bigger -- now those those guys on the phones don't exist anymore the problem is they just kind of the SEC is let this happen without any oversight and there's some concern is that there -- some things going on behind the scenes aren't good for investors.
Would you -- work.
While his personal question I have in mind if you like dealing with a computer system -- you go to particularly trader well special.
-- you don't have a choice you know I mean there's.
I think basically if you put money mutual fund nowadays you're gonna be trading with these computer systems and that's the -- and -- -- And they can tell you okay keep it.
This -- at this time in this fun don't have this much at this time -- Probably -- isn't only for Allie definitely liked think that it does.
This is people hate Wall Street right now.
We just got a survey from a law firm makes me think of it is 1987 the first Wall Street movie Gordon gecko green is good.
And this law firm -- out a survey after the two billion dollar loss achieve more in.
Too closely plus current after the Barclays Libor interest rate fixing scandal.
And the survey shows that a quarter of people not just people big time Wall Street executives in the US and the UK.
Said it will do something illegal if not a typical -- -- liner on pockets.
Well culture still exists after we keep talking about it and talking about it and kind of -- Wall Street.
Which brings me to the next question.
Today the market rate because of this culture against the average investor.
Well.
Greed is a very powerful force you know and what I found researching these markets over the past several years as there is a strong possibility.
That the United States stock market was -- from within.
The SEC's looking into the stuff we've written about her for the journal and we don't really know if it's true or not but there's some very troubling things.
Going on so that that doubt that you know people have -- Wall Street it's well founded and and you know we just gotta keep working to expose stuff.
And then you have the Wall Street people just -- it break it off because the costs yeah well you know.
They have you want -- personal opinion.
Scott Patterson thank you so much for coming on in your -- like -- traders say eyed bandits and the threat to the global financial system.
Dark fools think you go to the chat.
