Hello everybody, I would like to share a piece of good news with you. Brian’s publisher, Wiley contacted him in early June and let him know that sales of the book have been solid. Therefore, they are going ahead with the 2nd printing of the book now. Congratulations, Brian – our fellow member and our very own Writer-in-Residence at the Chamber!
Chasing the Same Signals
How Black-Box Trading Influences Stock Markets from Wall Street to Shanghai
by author, Brian R Brown
About the Book
A year before the sub-prime financial crisis materialized, there was a subtle warning that global equity markets were in distress. During August 2007, there was a 30 percent gap between the top stocks and the worst stocks; but the index itself was unchanged. Weeks later, prominent hedge funds came forward with similar stories about suffering massive losses in a single day. It was the first stock market panic – by machines that were Chasing the Same Signals.
Over the past decade, “black-box” trading has come of age. These firms use mathematical formulas to buy and sell stocks. The industry attracts the likes of mathematicians and physicists. Their investment philosophy is a marriage of science and economics. Quantitative trading has a long history, but the industry was transformed when technology allowed investors to trade stocks electronically.
The August 2007 crisis didn’t mark the demise of the black-box firms; rather the opposite. They were the first to feel the wake of the financial crisis, but were the best prepared during the aftermath. And now they’ve grown: more than 50 percent of today’s investors are computers.
The rise of black-box trading has led to a number of important questions: Are they creating volatility or stabilizing the market? Why are large price swings and reversal more prevalent that ever? What happened to the buy-and-hold investor? And what does their trading mean to mom-and-pop investors who interpret the health of our economy through Bloomberg news each morning?
ANDREW WORK’S AMAZON REVIEW
2 out of 2 people found the following review helpful:
The Matrix meets the Markets, March 16, 2010
|By||Work Gavin Andrew “Andrew Work, Exec Director… (Hong Kong) – See all my reviews
In the latter two movies of the Matrix trilogy, the Wachowski brothers explored the idea that computers could develop distinct behaviours, personalities and compete ruthlessly with each other. This book provides a glimpse of that future and it may start in the stock markets.
The power and reach of black box traders, their evolution and their present day ecology are laid out in this book in a way that a layman (like me!) could get what is going on in the markets. Shortly after reading it, I met the head of IT for Morgan Stanley in India and was able to have a fairly interesting discussion about the topic – his specialty. What is happening in the markets is amazing and billions of people with their livelihoods and futures at stake have no clue about it.
The author takes a balanced view of the benefits provided by black box trading as well as potential perils. One does come away with a sense that the competitive nature drives massive investment and regulators are not going to be able to keep up with developments in this area. What is happening is simply astonishing and the speed at which developments are happening are breathtaking.
Over 50% of executed trades a day are not just executed by computers -the computers record, analyse, feint, parry and respond to each other to make thousands of decisions a second. No person can keep up and the author shows when massive markets shifts has erased billions of dollars of paper worth in minutes as the computers chased the same signals.
The book makes it very clear what is happening and where the future might lie – the market isn’t the only source of data that moves the market! What isn’t clear is how much longer people will be making decisions on trades – it seems we are having trouble keeping up today.
“If you want to understand how computerized trading is impacting our markets, this book is for you”
Charles D. Ellis
Author,The Partnership: The Making of Goldman Sachs
“The interplay between algorithmically driven and traditional trading strategies affects the returns of all investors. Brian Brown’s new book provides a very clear overview of how these new strategies work and more importantly, how they influence liquidity, volatility and prices in the global equity market.”
Andrew J. Morton
Co-creator of the Heath-Jarrow-Morton(HJM) Framework
“Technology advances over the past decade have dramatically changed the dynamic world of stock market trading. Most analysts have failed to account for this brave new world in their Monday morning quarterback analysis of the recent worldwide financial systems collapse. Brian Brown has written the first book that clearly and colourfully describes the new technologically-driven way of doing business on the Street, and he does this with great precisions and street knowledge. This new world played a central role in the Wall Street collapse, and, paradoxically, will help drive the next ascent.”
Thomas F. Coleman
Dean and Professor, Faculty of Mathematics
Director, Waterloo Research Institute in Insurance, Securities, and Quantitative Finance
University of Waterloo
“Much has been made of the activities of High Frequency Traders during the Global Financial Crisis. In many cases they have been vilified, but often out of ignorance about the vital function that they perform in today’s hyper-speed financial markets. Brian sets out to demystify Hugh Frequency Trading and does so in an eminently readable fashion. This book will appeal to anyone, market professional or not, who wants to understand this often secretive group.”
E. John Fildes
Chief Operating Officer, Asia, Instinet Pacific