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The correct design requires less greed in the stock exchange | 189 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
The correct design requires hysteresis built in
Authored by: Anonymous on Sunday, August 05 2012 @ 09:55 AM EDT
Delay and hysteresis is not a cure-all for a feedback system. It depends on the
character of the delay and hysteresis.
In an analogue system the solution is often rather straight forward. In a
sampled system the sample delay often introduce a phase shift that can make a
stable negative feedback positive at some frequency and cause oscillations. I
found that out to my peril when I needed to limit a positive or negative flow to
certain absolute value. I tried to use the sampled signal that was at hand to
generate the feedback signal and got beautiful oscillations. It was later solved
by using an analogue absolute value circuit.

The Nyquist diagram is not to be overlooked.


[ Reply to This | Parent | # ]

Wrong comparison.
Authored by: jesse on Sunday, August 05 2012 @ 10:24 AM EDT
You are comparing a discrete function (stock market trades)
with a continuous function.

You can't do that.

It a better comparison would be the stock trading network is like any other
digital communications network.

A dropped transmission (lacking the ack) is retransmitted after a timeout
delay.

Unfortunately, the stock trading network cannot identify (and eliminate)
duplicate transaction.

In communication networks, that is the function of a router (eliminate
duplicates when identified), and the recipient. Without this you get race
conditions causing brief overloading of the packet processing... which leads to
additional packets being sent. This is called a "packet storm".

Again, it is unfortunate that the stock trading network cannot handle such
occurrences.

One cure is to extend the timeout. Another is to implement a random delay,
extending the timeout on each failure (though this doesn't eliminate the
duplicates). This is what is done with TCP connections. The required ack signal
identifies all packets that have been processed (with duplicates eliminated),
and the sender can then continue.

Without such flow control, there will be no stable network.

[ Reply to This | Parent | # ]

The correct design requires less greed in the stock exchange
Authored by: Ian Al on Sunday, August 05 2012 @ 11:56 AM EDT
As long as rich trading organisations can be charged large sums of money for
very short transaction closing times, the stock exchange will be too greedy to
avoid this fatal flaw in the trading system.

The banks were too greedy with the margins on derived products and it almost
destroyed the world economy. However, the banks could be bailed out with
taxpayers money.

When the stock exchanges (it could be any of the major world centres that causes
the meltdown) loses the link between trading volume and prices, no price quote
is reliable and the entire exchange will go bang in milliseconds.

As with the banks, when the first one falls the rest will follow because of the
world trading network. Unlike the banks, they are too big to fail, but cannot be
bailed out with taxpayers money.

Trading in shares will have to be suspended, while the world banks sponsor
monster IT systems to build a new relationship between stocks, shares and
commodity quoted prices and national currency reserves.

Speculative banking will cease to exist. Only the traditional bank lending to
people and businesses will survive. People and companies with considerable funds
available for speculation will have to have their funds frozen in the main while
the exchange system is rebuilt.

I have come to the conclusion that my pension fund and personal savings will be
largely protected as they will be part of keeping the world economy running
while the trading function is rebuilt.

I think the taxpayer will come to the conclusion that the people and companies
with considerable funds that were built by the destruction of the trading system
will have to have those funds frozen for eternity to avoid a repeat event. Its
not as if the taxpayer is able to repair the damage, any more.

---
Regards
Ian Al
Software Patents: It's the disclosed functions in the patent, stupid!

[ Reply to This | Parent | # ]

Hysteresis can cause instability, too
Authored by: artp on Monday, August 06 2012 @ 01:07 AM EDT
As I learned early in my career.

Actually, the system will never be stable under computer
control. Automatic control assumes a predictable system. In
financial trading, the system is TRYING to break the
control. It is how they make money.

There is no control system on earth that could make Wall
Street stable. Look at all the bank panics dating back to
the birth of the United States. Regular as clockwork.

Trading is a zero sum game. If someone wins, someone else
has to lose the same amount won. Letting people gather
profits because it is "good for the economy" is an oxymoron.

---
Userfriendly on WGA server outage:
When you're chained to an oar you don't think you should go down when the galley
sinks ?

[ Reply to This | Parent | # ]

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