WIRED, Jan-11, Algorithms Take Control Of Wall Street. Today Wall street is ruled by thousands of little algorithms, and they've created a new market - volatile, unpredictable, and impossible for humans to comprehend. It's the machine market now, we juts trade in.
With other words, a cyber muscle overruns markets. I am not assessing the principle approach.
It reminds me that in 1987, a first conference in New Mexico joined avantgarde scientists from various fields created the name of a new field of research Artificial Life.
In short it is about how complex behavior can be simulated with a system of simple rules. Take the swarming behavior example: Craig Reynolds has first imitated swarm behavior in a computer simulation based on only three corresponding principles, Separation, Alignment and Cohesion.
More general, these models or simulations consist of often a large number of elements, all of which interact according to a set of rules. They are called Complex Systems when their behavior cannot be predicted, even though all correlations and initial values are known.
What will happen, if trading swarms become avalanches?
Will trading bots finally need to consult risk management bots? Will regulatory bots ... ?