Robots

Good article about robots in the FX market which equally applies to equities in Australia. (I’m typing on a stupid iPad)

In stocks, there are two basic robot strategies at work. The first are momentum and arbitrage chasers. This is a bizarro world robots fighting one another (and people) to front run and or maximise returns of volume-weighted average prices (VWAP)

The second are the analytical strategies like CTAs and risk-parity which leverage fast into pre-described scenarios. Mostly it’s trend-following. Like the Terminator doing technical analysis.https://www.macrobusiness.com.au/2020/05/turns-out-robots-are-driving-the-australian-dollar/

Both exaggerate moves rather than create them, increasing the amplitude of volatility, which they then take advantage of.If you combine it with the massive role of passive investing today, most of the market is controlled by these automatons, while an increasingly select growth of active fund managers set the direction.

But if they are housed under the same roof, such as in the case of Blackrock and others, then the risk of market manipulation starts to increase. Especially when some of these same firms are also helping monetary authorities buy and warehouse the same assets!It’s almost as if US capital markets have become a giant automated quango of the benefit of the uber-rich.You don’t say