Stock Market Robots Trade At Speeds Too Fast For Humans: Are Machine ‘Mobs’ Taking Over Global Finance? [STUDY]

By Philip Ross on September 12, 2013 2:09 PM EDT

computers
Superfast computers trade at speeds humans can't detect - and they're getting smarter. (Photo: Reuters)

A superior race of robots taking over mankind probably won't look like the ones in the film "I, Robot." More likely, they'll resemble the computer screens we stare at day in and day out. Take stock markets, for example. These complex trading systems use superfast computers to digest algorithm on top of algorithm at speeds too fast for humans to perceive. Some scientists say this has given rise to a global ecology of machine "mobs" that are taking over global finance.

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And occasionally, glitches occur, as happened in August when a technical malfunction temporarily froze the NASDAQ. Trade on the stock market stopped for three hours. And it's not all that uncommon.

Researchers from the University of Miami say glitches like this may be the result of superfast "robot mobs" that overwhelm the system. These machines work on time scales of less than 1 second. Human capability lags far behind that of machines in trading on the global market. Microchips for trading operate within a fraction of a millisecond - about a thousand times faster than the fastest human response time.

"These algorithms can operate so fast that humans are unable to participate in real time, and instead, an ultrafast ecology of robots rises up to take control," explains Neil Johnson, professor of physics in the College of Arts and Sciences at the University of Miami, and corresponding author of the study. "What we see with the new ultrafast computer algorithms is predatory trading. In this case, the predator acts before the prey even knows it's there."

After analyzing price streams from multiple stocks and exchanges between Jan. 2006 and Feb. 2011, researchers found 18,520 "extreme events" - things like crashed and spikes - that lasted for mere milliseconds. In their report in Nature Scientific Reports, they say these events are the result of ultrafast computer trading.

Johnson says our global market has become a landscape of predators (robots) and prey (us). "The predator acts before the prey even knows it's there," she said.

Finance isn't the only area of the economy robots are encroaching on. A July article on AOL.com notes the rise of robots in the restaurant industries in Japan, China and Great Britain. Fast food chains in those countries have reportedly started piloting the use of robots to handle basic tasks normally done by human workers. The reason is in the numbers.

In China, fast food robot "Chef Cui" slices noodles for the one-time price of $2,000 USD, compared to $4,700 a year salary for a human noodle chef.

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