Cash in a Flash

A flash crash is a mechanical engineering problem, according to HFT firms and financial regulators.

It is no accident that HFTs reported record profits as financial interests seek yield, forced into a more hi-risk equity interest (which can change in a flash), in a near-zero interest rate environment.

The question is whether “the crash” is the intended purpose of the engineering problem. If making record profits depends on it, then the crash is the intended purpose. The question then becomes whether it is proper.

HFT algos are risk-transfer devices, engineered to mechanically transfer risk from buyers to sellers (like when, for example, a bank confiscates your assets and shorts your financial interest).

Like HFT CEOs say, transferring risk by mechanical means is not new. Exchanges are designed to not only provide a platform for buyers and sellers but to deliberately transfer risk. It is a well-established ritual.

Market insiders make lots of money by “virtue” (having the strength) of engineering the devices used to mechanically yield risk-minus-the-reward on command. Since it operates using supply-demand attributes, however, the yield (the quality of intendency) has an on-demand attribution to limit the intending liability (the fully assumed risk of loss that forms the quantity of probable risk).

Notice the mechanical exculpation of the risk-value, intending to conserve the full quantity of the reward “derived” from the risk (risk-minus-the-reward on command), using derivative devices, which includes algos that derive reward from a mechanical disadvantage of the sellers in a HFT exchange.

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About griffithlighton

musician-composer, artist, writer, philosopher and political economist (M.A.)
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