Connect with us

Business

Algorithm rush: belated entry into modern trading | The Express Tribune

Published

on

Algorithm rush: belated entry into modern trading | The Express Tribune



ISLAMABAD:

When we think of artificial intelligence (AI), our minds often jump to Hollywood blockbusters, imagining futuristic machines from I, Robot or The Terminator. Though the idea of intelligent robots in public assistance roles is still a few years away, AI algorithms already rule the global financial markets as of now.

With intelligent algorithms executing global trade of over $21 billion, human judgement no longer drives price action. Intelligent bots rip through order books in microseconds – exploiting inefficiencies invisible to the naked eye. These machines don’t debate value; they weaponise speed. A single line of code misfiring can erase billions before anyone blinks. Pakistan, meanwhile, is still writing its rulebook. The Securities and Exchange Commission of Pakistan (SECP) has finally realised the importance to regulate algorithmic trade space and is rushing to catch up with a technological revolution that has transformed global finance over the past two decades.

Proponents claim that algorithmic trading removes fallible human emotion from trading decisions and makes markets run more smoothly. However, many algorithms feed off trends from X (formerly Twitter), news headlines and other feeds, which implies they can still be affected by human herd mentality. This often results in amplification of price movements – with a possibility of market crash. In 2012, the US Knight Capital Group went bankrupt after it lost more than $450 million when its AI systems made erroneous orders that couldn’t be undone. Similarly, in 2014, a small over-the-counter trade in Japanese stock market led to an avalanche effect of trades amounting to $617 billion. Similarly, we had pound’s flash crash in 2016 due to rogue computer trades, misjudging market sentiments during Brexit negotiations.

Learning lessons from history, it would be wrong to assume that the Pakistan Stock Exchange (PSX) can handle the surge from algorithmic trading volumes and speeds. We need to forecast potential algorithmic trade scenarios and determine minimum technical requirements for microsecond trading algorithms. This is necessary to avoid system crashes and trading halts. Moreover, it is important to see if we possess adequate oversight capabilities and technical expertise to monitor microsecond trading patterns effectively.

The SECP has recommended to initially restrict algorithmic trading to institutional investors, which while prudent, creates a two-tier market that may disadvantage smaller players permanently. India’s experience shows that retail traders eventually demand access, and often get it through less regulated channels. Similarly, the proposed concept paper by SECP mandates “Initial Conformance Tests” and periodic testing, it lacks detail on stress-testing scenarios. While mandating kill switches, the proposed framework doesn’t specify response times or coordination mechanisms during market-wide disruptions. The 2010 Flash Crash in the US demonstrated that individual kill switches may be insufficient during systemic events.

Before approving any algorithms, the PSX must demonstrate that its systems can handle microsecond trading and massive order flows. The framework should mandate minimum technical standards and redundancies. Secondly, instead of a binary institutional/retail split, it may create a graduated system based on financial sophistication, capital requirements, and risk management capabilities. This could include certified retail traders and smaller institutional players.

Thirdly, the PSX needs to implement comprehensive market surveillance systems capable of detecting manipulation patterns across multiple algorithms and timeframes. The current framework’s emphasis on post-trade analysis may be insufficient.

Pakistan stands at a critical juncture. The global trend towards algorithmic trading is irreversible, and the country cannot afford to remain analogue while regional competitors leverage technological advantages.

India’s messy experience with retail algorithmic trading offers important lessons, but Pakistan’s delayed entry also provides opportunities to learn from others’ mistakes.

The writer is a Cambridge graduate and is working as a strategy consultant



Source link

Business

Australia fuel crisis: Panic buying prompts PM to reassure nation over fuel supply

Published

on

Australia fuel crisis: Panic buying prompts PM to reassure nation over fuel supply



Anthony Albanese says nation’s supply remains “secure” amid reports of panic buying and shortages.



Source link

Continue Reading

Business

Meta and YouTube found liable in social media addiction trial

Published

on

Meta and YouTube found liable in social media addiction trial



A woman has been awarded $6m in a verdict that could have implications for hundreds of other cases in the US.



Source link

Continue Reading

Business

Target faces a new boycott over ICE response as retailer presses ahead with turnaround

Published

on

Target faces a new boycott over ICE response as retailer presses ahead with turnaround


A major teachers’ union is calling for its members to skip Target when buying back-to-school supplies, the latest twist in a series of boycotts that have targeted the big-box retailer as its turnaround shows signs of life, CNBC has learned.

The AFT, or American Federation of Teachers, passed a resolution Thursday that calls on its 1.8 million members and others to shop at local stores and not at Target, saying the company did not respond adequately to the surge of federal immigration enforcement in the retailer’s hometown of Minneapolis this winter. Federal agents shot and killed two U.S. citizens, Renee Good and Alex Pretti, during the operation.

The labor union, which is affiliated with the AFL-CIO, plans to urge a similar resolution at AFL-CIO’s convention in Minneapolis this summer and at conventions held by other organizations, including the NAACP and LULAC, AFT President Randi Weingarten said.

Target declined to comment specifically on the AFT’s resolution but said in a statement that it has “a longstanding commitment to strengthening the communities we serve,” including donating 5% of profits since the company’s founding and offering a discount to educators as part of a teacher appreciation program.

Target’s annual sales have declined for the past three years in a row, but the company’s new CEO Michael Fiddelke laid out an ambitious plan earlier this month to refresh its stores, add more enticing merchandise and return to sales growth. The retailer said it expects net sales to rise about 2% this fiscal year compared with the prior year and anticipates sales will grow every quarter.

It is unclear if and how much the AFT’s call for a back-to-school boycott could hurt Target, which is trying to win back customers. Earlier this month, Atlanta area pastor Jamal Harrison Bryant announced the end of a yearlong boycott of the company, called Target Fast, which had started because of the company’s rollback of major diversity, equity and inclusion initiatives.

At a press conference, Bryant said Target has demonstrated its commitment to the Black community with investments in Black businesses and donations to Historically Black Colleges and Universities. Yet other activists leading a separate boycott, including former Ohio state Sen. Nina Turner, have said they continue to call for shoppers to steer clear of Target.

The AFT previously supported and participated in the Target boycott over its DEI rollback.

The retailer has attributed some of its sales losses to backlash to its DEI decision, along with other factors including company missteps with merchandise, a weaker store experience and softer discretionary spending.

At an investor meeting in Minneapolis in early March, Fiddelke stressed that it’s “a new chapter for Target.” He said the company is “doing the work to build connection with new guests, deepen relationships with existing guests and earn back trust with guests we’ve disappointed.”

In a separate email to Target employees earlier this month, Fiddelke highlighted how the retailer is putting its strategy into action, including through its move to cut prices on more than 3,000 items and the opening of its 2,000th store. He said Target has made progress with winning back trust, too, noting the end of the Target Fast boycott.

He said Target has had “ongoing conversations with the organizers” of the boycott, who have “acknowledged the meaningful contributions Target has made, and will continue to make, to the Black community.”

In an interview with CNBC, Weingarten said the AFT’s boycott is focused on what she called Target’s lack of response to the surge of aggressive and violent immigration enforcement in its own backyard. Weingarten said the AFT sent a letter to Target and met with Target staff to encourage them to speak up before the union moved to pass the resolution.

“Target was negotiating with our colleagues in the civil rights community for weeks and weeks and weeks,” she said. “They could have very easily dealt with both [concerns about DEI and immigration enforcement] and they chose not to.”

She said Target is “more worried about standing with the Trump administration than the communities that made them a profitable company.”

Fiddelke joined dozens of executives from Minnesota-based corporations in co-signing a letter in late January calling for an “immediate de-escalation” in the state after the fatal shooting of Pretti. However, the letter did not name the shooting victims Pretti or Good or call out the president, his immigration policies or federal agents.

Fiddelke also shared a video message with employees that more directly acknowledged current events, but stopped short of calling for ICE agents to leave the city or for accountability in the two shooting deaths.

Weingarten described the CEOs’ letter as “insulting” and said it “basically blamed both sides.”

She said the union, which includes many teachers, can have the greatest financial impact during the back-to-school shopping season this summer and fall. By passing the resolution now, she said, the AFT can get the word out to members and “give Target enough time to come back to its senses.”



Source link

Continue Reading

Trending