We’re a little late on this, but the emergence of the ‘Robin Hood’ day traders in Norway and Sweden, who managed to profit from the flaws in algorithmic trading programmes, reignites the old man versus machine debate.
Trading floors of investment banks have, of course, been cut back to the bone because of the rise of electronic and algorithmic trading techniques, which react faster than any human being can to price irregularities and market moving news.
While, the trader is obviously not obsolete, it seems that those operating outside of the confines of a large financial institution have a little more freedom to gain advantages over the machines.
Day traders Svend Egil Larsen, from Norway, and Peder Veiby from Sweden have just been cleared of market manipulation after discovering in 2007 how an algorithm of brokers Timber Hill would respond to trades in certain illiquid stocks, and profiting on this.
In a classic example of the sort of modesty prevalent in the financial sector, Larsen said the flaw was “painfully obvious” and managed to make $50,000 in a few months.
It’s a rare victory, however, with algorithmic traders usually outgun day traders. “We feel like Robin Hood, or David beating Goliath,” said Larsen.