High-frequency trading is the act of taking advantage of extremely fast trades, and compared to traditional trading, the most advanced high-frequency trading strategies can be as fast as microseconds. At such a high speed, many strategies can be born that are stable and profitable. For example, Professor Simmons' Medal Fund has achieved a net return of 35% per annum for 20 consecutive years; For example, Goldman Sachs' quantitative proprietary division earns billions of dollars every year; There are also large investment banks such as Morgan Stanley and UBS that have invested heavily in such strategies.

However, if there is an error in the computer system of high-frequency trading, it will have a huge impact on the stock market in a short period of time. Accidents caused by the failure of the computer responsible for high-frequency trading are also frequently reported. Such as the huge losses of Knight Capital in early 2012 and the "flash crash" of the BATS exchange.

Knight Capital is one of the largest market makers in the United States, and Knight Capital is the largest financial electronic brokerage dealer in the United States, with one of its companies accounting for 17.3% of the trading volume of the New York Stock Exchange and 16.9% of the NASDAQ.

However, due to an error in Knight Capital's stock trading order, the prices of 150 stocks changed collectively, and the market value of nearly 1 trillion stocks was affected. As soon as the news was announced, Knight Capital plummeted 52.31% pre-market. The incident was caused by a minor "technical problem" with Knight Capital, which caused it to issue the wrong stock trading order to the exchange. The mistake not only caused Knight Capital's stock to close down 33%, but also caused losses to five hedge funds that held large holdings of Knight Capital's shares.

In fact, this is not the first time that the United States has suffered from high-frequency trading or technical failures. The source even said to the US Congress. Small accidents that happen on individual stocks happen almost every day. Business Insider reported that in less than a year, from August 2011 to September 27, 2012, Nanex, the developer of the trading database, recorded more than 2,000 unusual stock movements.

On the first day of listing, Facebook suffered huge losses due to a delay in information feedback and a system failure in the NASDAQ stock market, which delayed the opening of trading by 30 minutes and caused customers to place repeated orders. Earlier, the American stock exchange operator giant BATS also directly canceled the company's IPO due to a serious technical failure; One of the most memorable experiences for the market was in May 2010, when the Dow Jones Industrial Average plummeted 1,000 points intraday after a trader misentered a sell-off order. At one point, the market value evaporated nearly a trillion dollars.

In 2014. AN INFORMATION TECHNOLOGY COMPANY CALLED CYNK, WHOSE STOCK PRICE RECENTLY SOARED BY MORE THAN 36,000%, REACHED A MARKET CAPITALIZATION OF $4.5 BILLION. Curiously, however, the company has only one employee. It is still in the initial stage of development. This is despite the fact that it has already received $54,000 from 30 investors. At present, it is still difficult to make ends meet. No income, no products, no assets, that is to say, no investment value at all, yet such a high market capitalization. This has become one of the biggest farces in the US stock market.

As BusinessInsider points out, Cynk stock has returned even more than Apple shares that people bought in 1980 and still hold today. At the peak of dot-com speculation in the '90s, ill-intentioned people were convinced that human greed drove dot-com stocks higher, even though many internet companies never made a penny. But today, with the rise of high-frequency trading, there is reason to wonder if Cynk's stock skyrocketed just some sort of algorithmic error, or perhaps Wall Street's computers playing tricks on everyone.

On the face of it, it's not far-fetched to think that Cynk stock is just a computer-spawned bubble. Keep in mind that S&P 500 stocks plunged at one point, losing more than $136 billion as a hacker's hijacked Associated Press Twitter account falsely reported a White House explosion. The skyrocketing price of Cynk stock was preceded by the fact that Twitter accounts that were hyping up the stock began posting news hyping Cynk. Today, stock traders' computers have been empowered to make their own decisions, and they may dismiss Twitter spam as real intelligence.

Moreover, stocks are traded at such a fast pace that computer decisions can cause losses before a person can even stop a trade. That said, Cynk's stock spike is more likely to be a computer programming error than a software glitch. Considering the low trading volume of Cynk stock, traders don't have much to gain or lose, at least by Wall Street standards. Winners and losers are likely to be penny stock scammers and day traders chasing small profits. There are a small number of investors who may think that Cynk is the big target they have been looking for, and some of them may have taken a profit and left.

As Michael Lewis and others have revealed, high-frequency trading is a behavior similar to arbitrage, they happen quickly, and traders get news from stock exchange insiders. While most high-frequency trading is still based on market statistical analysis, the example of the Associated Press Twitter account hack shows that traders would allow their computers to scour their own social media feeds and news in search of a competitive advantage.

The problem is that computers are still not smart enough to parse the complexities of human communication and reliably judge which messages have real value. After the Associated Press incident was reported, the information provided by the broker to traders was verified. These messages are also processed by an algorithm to determine whether the news about a company is positive or negative. It is almost certain that these sources will not include the pushes of stock speculators who are driving the skyrocketing Cynk stock. Theoretically, even if the computers that operate stock trades collect this junk information, the data they analyze will include a company's basic facts: revenue, assets, or products.

But given Wall Street's fantastical mindset in the past, such as in the dot-com and housing markets, it's not hard to imagine that someone is giving their computers more freedom than they can do, like handing over the keys to a teenager. An overly eager, first-mover seeking advantage could mislead Wall Street with a flood of information on social media. And Wall Street analysts think. Computers with sentiment analysis capabilities can do just as well as people, if not better.

However, we know from social media and the stock market that humans are prone to cognitive biases and can easily rationalize emotional drives, leading to bad choices, just like they would buy Cynk stock. The advantage of using computers as a decision-making aid is that you can exclude outside distractions and the impact of messages and other unstructured data from social media. Perhaps the next tech bubble may not be due to human stupidity and greed, but to technology itself.

Who is Wang Tianyu? Concubine Ling Fei's hacking skills were all taught by Wang Tianyu herself, but Wang Tianyu rarely showed them. Wang Tianyu knew it in his heart. To hack or attack other computers or systems. The first step is to find the loopholes that exist in them.

Therefore, when Wang Tianyu wants to deal with Gao Sheng, he is constantly looking for Gao Sheng's loopholes and weaknesses. Because of the ambiguous relationship between Gao Sheng and the U.S. government, it is simply impossible to defeat Gao Sheng through fair competition.

But Gao Sheng is the kind of investment bank that is more aggressive. This can be seen from the fact that 40% of its profits come from trading. What is the proportion of Gao Sheng's trading in the financial market?

Programmatic trading is the main trading method of Gaosheng. Goldman Sachs' quantitative proprietary division specializes in programmatic trading, and Gaosheng has more than one programmatic trading system, and high-frequency trading is only one of the programmatic trading systems.

Nothing in this world is perfect. The same is true of Gao Sheng's programmatic trading systems, Wang Tianyu quickly cracked the principles of those programmatic trading systems and found the weaknesses in them.

It seems that what Wang Tianyu wants to defeat is not Gao Sheng, but Gao Sheng's computers. After all, computers are not people, and without people's intelligence, it is easy for Wang Tianyu to defeat them. And the man-machine war is not unprecedented.

Back a few years ago, Sven Egil Larsen and Pedwayby each discovered predictable patterns in the automated trading algorithms used by the American broker TimberHill to trade several light stocks in Norway. When they place an order, the algorithm will fulfill the order and push up the buy and sell price at the same time. By buying small amounts in batches, they pushed up the price of TimberHill before selling the stock. The two traders made a profit of about £40,000 in 5 months.

Norwegian public opinion was on the side of humanity in this man-machine war, but the Oslo District Court handed down a harsh verdict. The court convicted the two traders of market manipulation and sentenced them to suspended imprisonment and confiscation of their illegal gains. Such a verdict based on the Prohibition of Abuse in the European Market Directive may be legally justified, but it is not quite in the public interest, since there will be no benefit to society in protecting the capital behind such a stupid algorithm. No one forced them to trade that way; In fact, the purpose of automated trading is to discover and take advantage of patterns more efficiently than humans. In this case, the "outdated" humans defeated the machines.

It should be affirmed that the Tribunal did not uphold this protection. Instead, it claims that these transactions create misleading signals on the supply, demand side, leading to artificial price manipulation that undermines the market as a whole. This may be true from a legal point of view, but from an economic point of view, it is doubly confusing. In an illiquid market, there are very few trades due to fundamentals. Algorithms and traders are a big reason why supply and demand exist here. Sticking to price "natural" in such a market would mean a total ban on day trading and algorithms.

The court also said the transactions had exacerbated market volatility. That's true, but machine programmers who drive up prices whenever people buy are equally to blame. A U.S. government regulatory investigation into the "lightning crash" would be useful – as would it be for the market to root out the stupid algorithm in its own way, i.e., bankrupt the algorithm owner.

However, Wang Tianyu is now facing Gao Sheng, one of the two largest investment banks in the United States, which seems very simple on the surface, but it is very difficult to operate in practice. First of all, you have to be able to get those programmatic trading systems of Gaosheng, and be able to crack them, this alone basically shuts everyone out, so how can Gaosheng's secrets be so easy to obtain? Wang Tianyu also worked hard to get those things.

In addition, a large amount of money is needed to promote, and what finance really plays is capital, and without strong capital, even if you know the loophole of Gaosheng, there is no way to take it.

In fact, Wang Tianyu's approach is very simple. First of all, Wang Tianyu found out which positions Gao Sheng held, and then Wang Tianyu secretly established positions opposite to it, and then hacked into the Associated Press Twitter account tonight to spread unfavorable news about the positions held by Gao Sheng, of course, these news are true, Wang Tianyu does not want to be investigated by those financial regulators.

It's just that so much related news suddenly appeared in a concentrated manner, just like the Associated Press Twitter account falsely reported the explosion of the White House, those computers naturally reacted immediately, coupled with Wang Tianyu's secret traders continued to pour funds in, the result can be imagined, in a short period of time, those positions held by Gao Sheng suffered huge losses, and even some accounts were forced to close due to insufficient funds.

Of course, even those financial regulators in the United States and around the world will only focus on those financial institutions that program transactions, and let Wang Tianyu, the real black hand, continue to go unpunished. At the same time, Wang Tianyu also began to close positions, and the programmatic trading systems of those financial institutions became the best objects for Wang Tianyu to use.

Of course, this is just one of Wang Tianyu's moves, Wang Tianyu knows that this will only make Gao Sheng suffer heavy losses and greatly damage his vitality. Therefore, at the same time, Wang Tianyu used the principle of Gao Sheng's programmed trading system to introduce Gao Sheng's liquidity into the trap that Wang Tianyu had already set, the computer is no better than the human brain, it can ignore whether there are traps, as long as the conditions are met, it will unswervingly carry out.

Wang Tianyu immediately reversed Gao Sheng's funds as soon as they were introduced into the trap, without giving Gao Sheng any chance to react, and swallowed Gao Sheng's funds in one gulp, and there were no bones left.

And Wang Tianyu's plans are only a few minutes from tonight to the end of everything, and it only takes a few minutes, and even Gao Sheng and everyone in the world have not reacted, everything is over, and Gao Sheng is over.

Wang Tianyu secretly called Concubine Ling Fei into the study, and then couldn't wait to open the computer in the study.

Wang Tianyu opened his account and began to count the digits on all his accounts, and after a long time, Wang Tianyu wiped the sweat on his forehead and finally calculated it clearly.

Originally, the total net value of all his accounts was 8.25 trillion dollars, but now it suddenly became 15.25 trillion dollars, and even he himself was taken aback by this figure. That's a whole 7 trillion dollars! This is really a big gain for Wang Tianyu, even he didn't expect to be able to earn so much this time. (To be continued......)

PS: PS: You may think that these two pieces of information and cases are a bit much, these materials and cases were found by the prince with great difficulty, if there are no these materials and cases, maybe many people will not understand, or it will look like it is very ridiculous (will you think that it is so easy?). But with these cases, it will feel very real and logical!