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Place your bets…..

By Mike Cunningham On October 16th, 2011

When I worked for a Construction outfit, building and equipping a series of twelve- and fourteen-storey office blocks named Broadgate on the eastern edges of the City of London’s business district some twenty years ago, I fell into conversation with a guy who was ramrodding the fit-out for a big Swiss bank’s trading floor within one of the new buildings. He said that the expensive desks, the carpeting, the air-conditioning, the whole caboodle was to support the huge computers, served by the trading staff. The speed at which the computers would operate would be five seconds faster that their opposition, and that was the way in which they made all their profit; by being faster than the opposition’s computers and people in their decision making!

He then said something truly outrageous, which was that the various banks who were their ‘opposition’ had computers on order which would be faster and bigger than the Bank he worked for, and so the opposition would then be faster, and make more money, until a third round of newer, faster and larger computers could be developed and built to overcome the speed differential. Huge, mind-boggling sums of money were being spent so that one set of people could bet ever larger sums of money to try and outwit another set of people who were attempting to do the same to everyone else.

Fast-forward twenty odd years to the present, and it could be said that the worst dreams of Orwell have come true, without anyone even noticing. A group of mathematical analysts, helped and advised by super-computers and diabolically-clever software, are making huge sums of money all the time by betting on fractionally-small changes in the prices of literally millions of traded companies. As Private Frazer would state, ‘We’re doomed’!

2 Responses to “Place your bets…..”

  1. I suppose that it’s good for the computer companies and software experts!

  2. As a developer who actually writes some of the software you discuss above EP, I have to say I, (and the other developers), don’t usually make much money. The software companies do better but as usual it’s the city dudes who make a killing.