Sell Reuters Shares, Based On This Story

from the automatic-for-the-people dept

Tue, Dec 12th 2006 9:28am — Joseph Weisenthal

Automated, computer-based stock trading has been on the rise for some time. Yet, ultimately, most of the difficult decisions and analysis must be made by humans. For example, trading based on a major event (a merger rumor, or a quarterly report) can't be initiated by a computer. Reuters is hoping to change that with a new service that will put machine-readable tags on stories, so that computers can do trades based on events. The success of this will come down to two things. First, Reuters has to do a good job meaningfully portraying the gist of the story in a few tags. And second, humans will still have to write the algorithms that interpret the information and act on it. Overall, it's been slow going in terms of using computers to gather and collect financial data. XBRL, a language for letting computers interpret SEC reports is always being touted as the next big thing; it's now in its 14th year of being the next big thing. So while we may be able to automate some tasks, there's little prospect for removing humans from finance entirely. Now, just imagine the feedback loop we might see if computers started reacting to financial articles written by other computers.

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12 Comments

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Bumbling old fool, 12 Dec 2006 @ 9:43am

context error
For example, trading based on a major event (a merger rumor, or a quarterly report) can't be initiated by people.

From the sdrawkcab department?
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- Joe, 12 Dec 2006 @ 11:47am
  
  Re: context error
  Thanks for the catch. Fixed.
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brad, 12 Dec 2006 @ 10:00am

So glad someone else caught that before me.
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Sanguine Dream, 12 Dec 2006 @ 10:42am

Oh dear...
These machine readable tags... I'm sure I'm not the only one that is thinking about the possibility of forging these tags.

Its bad enough these days that we have people buying stock based on spam but if it all becomes automated then who will be there to monitor the legitimacy of the tags?
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- The infamous Joe, 12 Dec 2006 @ 10:50am
  
  Re: Oh dear...
  Oh, I agree wholeheartedly! In the middle of reading the post I thought to myself that this was just BEGGING to be abused.
  
  I, personally, can't wait.
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Anonymous Coward, 12 Dec 2006 @ 11:00am

Scary
This actually scares me. I'm no finance person, but doesn't this lead to the possibility of these machines reacting to an event which in turn causes an event that machines react to and so on into a downward feedback loop that crashes the market? I know there are protections against such things, but I would be hesitant to allow a machine free reign on the market.
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SPR, 12 Dec 2006 @ 11:08am

The really scary part is that there are those in positions of power who put total faith in computers. Basically, if the computer tells them one thing and you tell them something different, you have to be wrong. There are some things that you cannot depend on a computer for, like this. You have to have a human making the final decision.
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Beefcake, 12 Dec 2006 @ 11:31am

Rise of the Machines
I think they should call it Skynet.
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Matt Bennett, 12 Dec 2006 @ 11:47am

Look, Finance has enough stupid feedback loops just based on people being stupid, stupid programs ain't gonna make it better.
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Overcast, 12 Dec 2006 @ 12:32pm

LOL, so the execs at Reuter's can play games with where others are investing to make them more money?

/snicker
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Solo, 12 Dec 2006 @ 2:09pm

If your 'machine investment system' relies on tags rather than on humans to do the decision, you are just shifting the human factor to the 'taggers' and removing it from the investment side.

Now the burden is on the story writer. Same difference.
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Stu, 12 Dec 2006 @ 7:11pm

Overcast has it right.

Reuters goal is to make money for Reuters - like stockbrokers do. Whether you buy or sell, win or lose, your broker makes the same commission.

Reminds me of the fishing lure business. The moment you buy the lure, the product has fulfilled its primary purpose. Catching a fish is a secondary purpose.
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