The new wolves of Wall Street (Canal+)

History to offer you again, and always, quality programs; ). Master Confucius pointed me to this documentary last night. Well, actually, if you do us the kindness to follow us, you won't be too surprised. Because, with Elise Lucet, we have already discovered the High frequency trading. Nevertheless, if you are not up to date with what is happening in the stock markets, I think it is an important documentary, which allows you to quickly catch up on the matter…

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Built like a police investigation, this documentary explains the workings of this invisible system which is based on algorithms and immaterial flows.

It is May 6, 2010. It is 14:42:44 p.m., Dow Jones time, when the stock market begins to fall suddenly, without rational explanation. Traders panic in front of this vertiginous and incomprehensible fall which affects all the financial markets. The only solution found to fight against collective excitement: turn everything off for five seconds. When the servers restart a few moments later, the courses return to normal life. In less than ten minutes, prices plunged by 1000 billion dollars. At the time, we accuse poor human manipulation, confusion between thousands and billions of orders to pass. This is not so: it was indeed a “flash crash”, a stock market crash caused by a bug in the algorithms that now govern high-frequency trading.

This disturbing episode is at the heart of the documentary the New Wolves of Wall Street, by Ivan Macaux and Ali Baddou. A very successful film - with an aesthetic sometimes close to the credits of True Detective- which manages to make understand, in a simple way, the cogs of this invisible system which is based on algorithms and immaterial flows. Built like a police investigation, the documentary sends Ali Baddou on the trail of those who believe in high-frequency trading, those who profit greatly from it and those who try to contain it to limit its harmful effects.

Because these practices only rig the financial markets. They do not create values, contenting themselves with seeking to be faster than competitors in order to act as intermediaries. High-frequency trading consists of placing orders before others by short-circuiting them, then reselling them immediately. The companies that practice it do not keep the shares they buy, they only keep them for a few seconds, earning little on each transaction. But since they make tens, hundreds of millions a day, the gains can be colossal. And the little geniuses in mathematics are now recruited by the biggest companies in the field to imagine the smartest algorithms. Or the most perverse to choose from. This complicates the task of the authorities responsible for monitoring or regulating the markets.

Previously, the sinews of war was information, now it's speed: in one minute today, 21 million transactions are carried out. The main tool of these new generation traders: networks at a time when markets have replaced humans. The speed of the network is such an issue that a private line has been installed between the New York and Chicago stock exchanges. A colossal investment for 1200 kilometers of fibers but essential when gaining a few thousandths of a second can save or lose hundreds of millions of dollars. An even faster radio wave network was set up between Frankfurt and London. But this race for speed risks leading us to another crash. And this time, unplugging the servers may not be enough.

Source: Canal +

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