Hi Frank -
Re: "... I wondered if you or anyone else also made the association that I did: Englebart's framing of "similitude" (see below) as it would now apply to the shrinking spatial diameter of securities trading venues in order to hasten transaction times:"
I can see it, but the implications are not pleasant. Conceivably, trading would change completely: it would have to. Probably, there would have to be an interim period where it was banned, until all players could be put on equal footing. But that would be difficult.
First, Kelly makes it clear (and we can see) that similitude's applicability differs differs from one field to another.
Second, Kelly also recognizes (and again we can see) that similitude has limits; we may not have hit them yet, but we will. Whether those limits are temporary plateaus - the durations of which may be years, decades or centuries - or permanent, is unknowable. But it's fair to say that we can expect a pause, at least, in many areas.
Is similitude is applicable to trading? To what degree? For example, is to ["normal" trading] as [microprocessors] are to [what?] That ratio's hard to envision, never mind complete.
Third, if it is applicable, where are the limits? Should we go even further, and wire HFT to the trader's brain? Or have we already created something we can't control?
Microprocessors are faster than humans; we know that. We also know that AI (Artificial Intelligence) is progressing rapidly, with some correspondence to microprocessors. But as noted upstream, trading in this manner would be "enhanced" just as athletic performance is enhanced by use of steroids. It puts "natural" performance at a disadvantage, and it creates unfairness.
Such enhancement - here I'm thinking of such things as sending your clone to work, or neural implants that facilitate direct connection to networks and AI - have long been the realm of science fiction, and still are - but just barely. How they will evolve is unknown, but given mankind's advantage-seeking proclivities, the future seems clear: people will try to beat the system with enhancement.
In that context, HFT may only be a precursor to more extensive penetration of finance by advancing technology.
Yet as the Olympics have demonstrated, there's a deep-seated distrust of such enhancement, concurrent with recognition of the obvious: enhancement works: it creates an advantage.
Therefore, the practice has been banned from the Olympics.
Jim |
