The new information regarding the Flash Crash of 2010 following the arrest of Navinder Sarao has put the spotlight on the limits of robotic trading.
Robots have changed our lives. They have also revolutionized trading in financial markets. Unlike human traders, robots are disciplined and will not trade on emotions. Unfortunately, their discipline also makes them predictable, and this is a bad thing as they can be fooled more easily than humans by other investors who know the algorithms used by trading robots.
This is not just a problem for some investors but it has market-wide consequences, as evidenced by the Flash Crash. The question, therefore, is whether better algorithms will ever make robots disciplined without making them vulnerable to gaming.
Javier Gil-Bazo 