Momentum of Accelerated Capital. Note Quote.

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Distinct types of high frequency trading firms include independent proprietary firms, which use private funds and specific strategies which remain secretive, and may act as market makers generating automatic buy and sell orders continuously throughout the day. Broker-dealer proprietary desks are part of traditional broker-dealer firms but are not related to their client business, and are operated by the largest investment banks. Thirdly hedge funds focus on complex statistical arbitrage, taking advantage of pricing inefficiencies between asset classes and securities.

Today strategies using algorithmic trading and High Frequency Trading play a central role on financial exchanges, alternative markets, and banks‘ internalized (over-the-counter) dealings:

High frequency traders typically act in a proprietary capacity, making use of a number of strategies and generating a very large number of trades every single day. They leverage technology and algorithms from end-to-end of the investment chain – from market data analysis and the operation of a specific trading strategy to the generation, routing, and execution of orders and trades. What differentiates HFT from algorithmic trading is the high frequency turnover of positions as well as its implicit reliance on ultra-low latency connection and speed of the system.

The use of algorithms in computerised exchange trading has experienced a long evolution with the increasing digitalisation of exchanges:

Over time, algorithms have continuously evolved: while initial first-generation algorithms – fairly simple in their goals and logic – were pure trade execution algos, second-generation algorithms – strategy implementation algos – have become much more sophisticated and are typically used to produce own trading signals which are then executed by trade execution algos. Third-generation algorithms include intelligent logic that learns from market activity and adjusts the trading strategy of the order based on what the algorithm perceives is happening in the market. HFT is not a strategy per se, but rather a technologically more advanced method of implementing particular trading strategies. The objective of HFT strategies is to seek to benefit from market liquidity imbalances or other short-term pricing inefficiencies.

While algorithms are employed by most traders in contemporary markets, the intense focus on speed and the momentary holding periods are the unique practices of the high frequency traders. As the defence of high frequency trading is built around the principles that it increases liquidity, narrows spreads, and improves market efficiency, the high number of trades made by HFT traders results in greater liquidity in the market. Algorithmic trading has resulted in the prices of securities being updated more quickly with more competitive bid-ask prices, and narrowing spreads. Finally HFT enables prices to reflect information more quickly and accurately, ensuring accurate pricing at smaller time intervals. But there are critical differences between high frequency traders and traditional market makers:

  1. HFT do not have an affirmative market making obligation, that is they are not obliged to provide liquidity by constantly displaying two sides quotes, which may translate into a lack of liquidity during volatile conditions.
  2. HFT contribute little market depth due to the marginal size of their quotes, which may result in larger orders having to transact with many small orders, and this may impact on overall transaction costs.
  3. HFT quotes are barely accessible due to the extremely short duration for which the liquidity is available when orders are cancelled within milliseconds.

Besides the shallowness of the HFT contribution to liquidity, are the real fears of how HFT can compound and magnify risk by the rapidity of its actions:

There is evidence that high-frequency algorithmic trading also has some positive benefits for investors by narrowing spreads – the difference between the price at which a buyer is willing to purchase a financial instrument and the price at which a seller is willing to sell it – and by increasing liquidity at each decimal point. However, a major issue for regulators and policymakers is the extent to which high-frequency trading, unfiltered sponsored access, and co-location amplify risks, including systemic risk, by increasing the speed at which trading errors or fraudulent trades can occur.

Although there have always been occasional trading errors and episodic volatility spikes in markets, the speed, automation and interconnectedness of today‘s markets create a different scale of risk. These risks demand that exchanges and market participants employ effective quality management systems and sophisticated risk mitigation controls adapted to these new dynamics in order to protect against potential threats to market stability arising from technology malfunctions or episodic illiquidity. However, there are more deliberate aspects of HFT strategies which may present serious problems for market structure and functioning, and where conduct may be illegal, for example in order anticipation seeks to ascertain the existence of large buyers or sellers in the marketplace and then to trade ahead of those buyers and sellers in anticipation that their large orders will move market prices. A momentum strategy involves initiating a series of orders and trades in an attempt to ignite a rapid price move. HFT strategies can resemble traditional forms of market manipulation that violate the Exchange Act:

  1. Spoofing and layering occurs when traders create a false appearance of market activity by entering multiple non-bona fide orders on one side of the market at increasing or decreasing prices in order to induce others to buy or sell the stock at a price altered by the bogus orders.
  2. Painting the tape involves placing successive small amount of buy orders at increasing prices in order to stimulate increased demand.

  3. Quote Stuffing and price fade are additional HFT dubious practices: quote stuffing is a practice that floods the market with huge numbers of orders and cancellations in rapid succession which may generate buying or selling interest, or compromise the trading position of other market participants. Order or price fade involves the rapid cancellation of orders in response to other trades.

The World Federation of Exchanges insists: ― Exchanges are committed to protecting market stability and promoting orderly markets, and understand that a robust and resilient risk control framework adapted to today‘s high speed markets, is a cornerstone of enhancing investor confidence. However this robust and resilient risk control framework‘ seems lacking, including in the dark pools now established for trading that were initially proposed as safer than the open market.

Production of the Schizoid, End of Capitalism and Laruelle’s Radical Immanence. Note Quote Didactics.

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These are eclectics of the production, eclectics of the repetition, eclectics of the difference, where the fecundity of the novelty would either spring forth, or be weeded out. There is ‘schizoproduction’ prevalent in the world. This axiomatic schizoproduction is not a speech act, but discursive, in the sense that it constrains how meaning is distilled from relations, without the need for signifying, linguistic acts. Schizoproduction performs the relation. The bare minimum of schizoproduction is the gesture of transcending thought: namely, what François Laruelle calls a ‘decision’. Decision is differential, but it does not have to signify. It is the capacity to produce distinction and separation, in the most minimal, axiomatic form. Schizoproduction is capitalism turned into immanent capitalism, through a gesture of thought – sufficient thought. It is where capitalism has become a philosophy of life, in that it has a firm belief within a sufficient thought, whatever it comes in contact with. It is an expression of the real, the radical immanence as a transcending arrangement. It is a collective articulation bound up with intricate relations and management of carnal, affective, and discursive matter. The present form of capitalism is based on relationships, collaborations, and processuality, and in this is altogether different from the industrial period of modernism in the sense of subjectivity, production, governance, biopolitics and so on. In both cases, the life of a subject is valuable, since it is a substratum of potentiality and capacity, creativity and innovation; and in both cases, a subject is produced with physical, mental, cognitive and affective capacities compatible with each arrangement. Artistic practice is aligned with a shift from modern liberalism to the neoliberal dynamic position of the free agent.

Such attributes have thus become so obvious that the concepts of ‘competence’, ‘trust’ or ‘interest’ are taken as given facts, instead of perceiving them as functions within an arrangement. It is not that neoliberal management has leveraged the world from its joints, but that it is rather capitalism as philosophy, which has produced this world, where neoliberalism is just a part of the philosophy. Therefore, the thought of the end of capitalism will always be speculative, since we may regard the world without capitalism in the same way as we may regard the world-not-for-humans, which may be a speculative one, also. From its inception, capitalism paved a one-way path to annihilation, predicated as it was on unmitigated growth, the extraction of finite resources, the exaltation of individualism over communal ties, and the maximization of profit at the expense of the environment and society. The capitalist world was, as Thurston Clarke described so bleakly, ”dominated by the concerns of trade and Realpolitik rather than by human rights and spreading democracy”; it was a ”civilization influenced by the impersonal, bottom-line values of the corporations.” Capitalist industrial civilization was built on burning the organic remains of ancient organisms, but at the cost of destroying the stable climatic conditions which supported its very construction. The thirst for fossil fuels by our globalized, high-energy economy spurred increased technological development to extract the more difficult-to-reach reserves, but this frantic grasp for what was left only served to hasten the malignant transformation of Earth into an alien world. The ruling class tried to hold things together for as long as they could by printing money, propping up markets, militarizing domestic law enforcement, and orchestrating thinly veiled resource wars in the name of fighting terrorism, but the crisis of capitalism was intertwined with the ecological crisis and could never be solved by those whose jobs and social standing depended on protecting the status quo. All the corporate PR, greenwashing, political promises, cultural myths, and anthropocentrism could not hide the harsh Malthusian reality of ecological overshoot. As crime sky-rocketed and social unrest boiled over into rioting and looting, the elite retreated behind walled fortresses secured by armed guards, but the great unwinding of industrial civilization was already well underway. This evil genie was never going back in the bottle. And thats speculative too, or not really is a nuance to be fought hard on.

The immanence of capitalism is a transcending immanence: a system, which produces a world as an arrangement, through a capitalist form of thought—the philosophy of capitalism—which is a philosophy of sufficient reason in which economy is the determination in the last instance, and not the real. We need to specifically regard that this world is not real. The world is a process, a “geopolitical fiction”. Aside from this reason, there is an unthinkable world that is not for humans. It is not the world in itself, noumena, nor is it nature, bios, but rather it is the world indifferent to and foreclosed from human thought, a foreclosed and radical immanence – the real – which is not open nor will ever be opening itself for human thought. It will forever remain void and unilaterally indifferent. The radical immanence of the real is not an exception – analogous to the miracle in theology – but rather, it is an advent of the unprecedented unknown, where the lonely hour of last instance never comes. This radical immanence does not confer with ‘the new’ or with ‘the same’ and does not transcend through thought. It is matter in absolute movement, into which philosophy or oikonomia incorporates conditions, concepts, and operations. Now, a shift in thought is possible where the determination in the last instance would no longer be economy but rather a radical immanence of the real, as philosopher François Laruelle has argued. What is given, what is radically immanent in and as philosophy, is the mode of transcendental knowledge in which it operates. To know this mode of knowledge, to know it without entering into its circle, is to practice a science of the transcendental, the “transcendental science” of non-philosophy. This science is of the transcendental, but according to Laruelle, it must also itself be transcendental – it must be a global theory of the given-ness of the real. A non- philosophical transcendental is required if philosophy as a whole, including its transcendental structure, is to be received and known as it is. François Laruelle radicalises the Marxist term of determined-in-the-last-instance reworked by Louis Althusser, for whom the last instance as a dominating force was the economy. For Laruelle, the determination-in-the-last-instance is the Real and that “everything philosophy claims to master is in-the-last-instance thinkable from the One-Real”. For Althusser, referring to Engels, the economy is the ‘determination in the last instance’ in the long run, but only concerning the other determinations by the superstructures such as traditions. Following this, the “lonely hour of the ‘last instance’ never comes”.

Quantum Informational Biochemistry. Thought of the Day 71.0

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A natural extension of the information-theoretic Darwinian approach for biological systems is obtained taking into account that biological systems are constituted in their fundamental level by physical systems. Therefore it is through the interaction among physical elementary systems that the biological level is reached after increasing several orders of magnitude the size of the system and only for certain associations of molecules – biochemistry.

In particular, this viewpoint lies in the foundation of the “quantum brain” project established by Hameroff and Penrose (Shadows of the Mind). They tried to lift quantum physical processes associated with microsystems composing the brain to the level of consciousness. Microtubulas were considered as the basic quantum information processors. This project as well the general project of reduction of biology to quantum physics has its strong and weak sides. One of the main problems is that decoherence should quickly wash out the quantum features such as superposition and entanglement. (Hameroff and Penrose would disagree with this statement. They try to develop models of hot and macroscopic brain preserving quantum features of its elementary micro-components.)

However, even if we assume that microscopic quantum physical behavior disappears with increasing size and number of atoms due to decoherence, it seems that the basic quantum features of information processing can survive in macroscopic biological systems (operating on temporal and spatial scales which are essentially different from the scales of the quantum micro-world). The associated information processor for the mesoscopic or macroscopic biological system would be a network of increasing complexity formed by the elementary probabilistic classical Turing machines of the constituents. Such composed network of processors can exhibit special behavioral signatures which are similar to quantum ones. We call such biological systems quantum-like. In the series of works Asano and others (Quantum Adaptivity in Biology From Genetics to Cognition), there was developed an advanced formalism for modeling of behavior of quantum-like systems based on theory of open quantum systems and more general theory of adaptive quantum systems. This formalism is known as quantum bioinformatics.

The present quantum-like model of biological behavior is of the operational type (as well as the standard quantum mechanical model endowed with the Copenhagen interpretation). It cannot explain physical and biological processes behind the quantum-like information processing. Clarification of the origin of quantum-like biological behavior is related, in particular, to understanding of the nature of entanglement and its role in the process of interaction and cooperation in physical and biological systems. Qualitatively the information-theoretic Darwinian approach supplies an interesting possibility of explaining the generation of quantum-like information processors in biological systems. Hence, it can serve as the bio-physical background for quantum bioinformatics. There is an intriguing point in the fact that if the information-theoretic Darwinian approach is right, then it would be possible to produce quantum information from optimal flows of past, present and anticipated classical information in any classical information processor endowed with a complex enough program. Thus the unified evolutionary theory would supply a physical basis to Quantum Information Biology.