Algorithm empire-Wall Street, the first domino card

One day in early 1987, a staff member of the Nasdaq exchange appeared in the elevator of the World Trade Center. Let's call him Jones. He finds the right elevator and presses the button. He is a regular visitor to a rapidly growing customer. Jones knows what kind of people he will see next. All the people engaged in equity trading on Wall Street share the same things: white men with Ivy League education backgrounds and profits, nothing special.

He walked through the corridor and came to the office area. He sat down and started to work hard. He was ready to welcome the agitation and excitement in the office area. The exchange and money-capturing game programs on TV are the same. A person is put into a glass box and a lot of money falls from the sky. However, some of the transaction orders on the Exchange are all about losing money. Agile and skilled traders can quickly trade and quickly identify which transactions are lost and which ones can make money.

The front-end of the company received Jones and then went into the room to ask the master. She brought a tall, silver-haired, neatly dressed man. He's Thomas? Peter Fei has a pair of blue eyes and speaks with an accent. He welcomed Jones's arrival.

Jones would not have imagined that Peter Fei would later become one of the richest people in the United States and worth more than 5 billion yuan. He was just a nouveau riche on Wall Street. However, his transaction volume keeps increasing, and his profits keep increasing. Jones has been curious about why people like Peter can continue to make profits from the market. Did he hire the smartest person? Does he have a strong research department? Is he taking big risks and doing big luck?

What Jones does not know is that Peter is not a trader, but a computer programmer. He does not rely on observing the expressions of people in the transaction department to predict the market trend or how the economic trend affects the stock trend. He relies on writing code. He wrote thousands of lines of code in a variety of computer languages (such as Fortran, C, and lisp), and the algorithms they built made him the best on Wall Street, although not large. He is already the leader of the new generation of Wall Street.

Peter Fei took Jones into the transaction Hall, and Jones was confused. The more he sees (but not much to see), the more confused he is. He expected a crowd of people, a loud phone call, a printer sound, and a sales call from traders who entered trading instructions on NASDAQ trading terminals. But this scene does not appear in front of him. In fact, he only saw one NASDAQ transaction terminal. He knows how big the transaction volume of Peter Fei is, but how can this happen? Who is the transaction maker?

"Where are other transaction sites ?" Jones asked, "What about your traders ?"

"That's, it's all here ." Peter points to the IBM computer next to the only NASDAQ transaction terminal in the room, saying, "Our transactions are all done with it ." There is a connection line between the transaction terminal and IBM computer, which contains code indicating the transaction type, transaction time, and transaction quantity. The NASDAQ employee did not expect that he just saw the world's first fully automated algorithm trading system. Peter's device not only prompts the transaction type like the previous trading system, but also simply pops up the transaction order that requires human execution. The computer sneaked into the NASDAQ trading terminal and made full decisions and executed transactions without human involvement. Although its opponents are people, they are all defeated.

The transaction data obtained from the NASDAQ terminal is constantly increasing. Peter's code can use this data to analyze the market and easily open a bill and sell a ticket based on the buyer's bid and the seller's price. This price difference is the transaction price difference. At that time, the NASDAQ transaction market price difference can reach 25 cents per share, so a transaction of 1000 shares (for example, opening a bill at $19.75 price, if you open a sales order at $20.00, you can make a profit of $250 without risk.

For Peter Fei, he uses machines to execute transactions, and the risk cost can be lower. At that time, traders frequently issued orders.^{1. The biggest risk they face is that after a wave of market turmoil, they can still put the original pending orders High. Most market traders can only respond to the market at the same speed as traders. Traders must constantly read new quotations from computer screens, study quote information, and re-develop transaction plans, cancel the old order, and enter a new quote on the keyboard of the Nasdaq terminal. If a trader eats a few more tuna sandwiches or is joking with his colleagues, he may be left behind by the trading market. Peter's computer does not need to eat lunch. It can hold on to the fluctuating trading market and greatly reduce risks.}

_{1. In the electronic trading of the securities market, a single word is equivalent to a Commission, that is, an instruction sent by an investor to the trading system by phone or computer when deciding to buy or sell a stock. -- Editor's note}

Peter's transaction organization opened a new chapter in Wall Street. Since then, computer programmers, engineers, and mathematicians have begun a 20-year attack on the financial market, using algorithms and automated transactions. algorithms are sometimes extremely complex and sophisticated, intelligent enough to replace people becomes the decisive force in the financial market.

Jones was stunned. Peter Fei regards all of this as an innovative transaction method, but Jones thinks that he cheated on a terminal with a temporary configuration, in violation of the transaction rules.

"You cannot do this ." Said Jones.

NASDAQ has no trading place, and all trading is done by phone or computer. The computer network receives transaction commands uploaded by the keyboard of an independent NASDAQ transaction terminal. Peter Fei integrated the data cable that was supposed to be connected to the transaction terminal and connected it to a circuit board embedded in the ibm pc motherboard by his programmers and physicist team. The IBM computer runs a software program compiled by Peter. The computer obtains information from the NASDAQ data line, uses algorithms to analyze the market, and quickly makes a transaction decision. Then, the transaction ticket is sent back to the inside of the Nasdaq terminal through a connection line. Before that, no one knows that Peter has intruded into NASDAQ.

Nasdaq won't let the laboratory of this wonderful design and crazy scientist be known to market participants. Do other traders feel comfortable knowing that they are fighting intelligence with algorithms running on IBM computers, rather than playing games with gambling players who bet on the market with intuition? Nasdaq does not want to know the answer.

"The connection between a transaction terminal and an IBM computer must be cut off. You have to input transaction commands one by one using a keyboard, just like other traders do ." Said Jones.

Jones left. Peter Fei stood in the office and thought this might end his career. Nasdaq gave him a week's correction time, and his transaction must comply with supervisor's requirements. He suffered from the thought of removing his trading machine. To hire a trader sitting in front of a computer all day and entering trading instructions, he is not interested in this idea, even if it can attract young and cheap traders. It took him several years to free his trading organization from the defects of human transactions and the capricious and instant rise of people. People will inevitably encounter errors, laziness, and drive-downs. The key is that there is a delay in the input of transaction instructions. Therefore, it is difficult to re-use human resources to achieve the same effect as automated machine transactions, the efficiency of transaction institutions will be lost overnight. There must be a better solution.

In the evening, he returned to his home in the Upper East District to prepare for his bed. A solution suddenly emerged in his mind. This solution is difficult, but it may solve the problem. Peter believes that he can capture information from the transaction terminal. No need to splice cables, no need to embed boards, no need to do anything. But how to implement it? He asked his engineers whether they could create a device to read information directly from the screen, just like a camera, and then convert the information into electronic characters, to the IBM computer waiting for instructions. The answer is yes.

However, the problem of solving the data source is only the beginning. Since no one is sitting on the Nasdaq terminal, how does Peter Fei complete the transaction? He cannot connect a transmission line to a Nasdaq terminal as before. No. NASDAQ makes it clear that transaction commands must be input through a keyboard. Peter Feiling had a crazy thought with a flash of light.

In the following crazy week, Peter and his best engineers were busy welding metals, coding, and welding data lines. They installed a large fresh lens in front of the screen on the Nasdaq terminal to enlarge the screen font. A camera was installed 1 feet away from the lens. Connect a data cable from the camera to a computer next to it. Peter and his programmers spent just a few days compiling a set of software that could decode the visual data sent from the camera. Those data flows from specific program software to the algorithms that have already been completed by Peter, which were directly connected to the NASDAQ terminal through data lines.

Now the IBM computer has a new connection line. Instead of connecting to the NASDAQ terminal chassis, it connects to the pile of dense metal rods, metal plugs, and handles hanging over the terminal keyboard. If cameras and screen reading devices are a little strange, the suspended systems designed by Peter's are so strange. It reminds people of complicated and fine mechanical equipment at the beginning of the industrial revolution. This device is an automated typewriter assembled from scratch. The handle repeatedly knocks on the keyboard and executes the transaction commands sent from the computer. In less than 30 seconds, there are dozens of transaction ticket input terminals.

Nasdaq said that the transaction order must be input to the terminal, but no one is required to complete the input. Peter's team spent six days creating a semi-robot that inputs transactions and instructions. On the surface, he abides by the law, but actually violates the nature of the law. Peter Fei is not worried. Isn't Wall Street a place where laws, alternatives, and trade secrets are everywhere? And always favor the most creative scammers.

A week later, Nasdaq Supervisor Jones made an appointment. Peter Fei saw him in the elevator room and took him through the corridor to the Trade Hall. A week ago, the trading room was noisy and busy. This is what the trading room should look like. Peter Fei took Jones through the door and proudly pointed to his own creations. The NASDAQ employee seems to be in rule.com? The scenario described by verne's sci-fi novels.

"What is this ?" Jones asked.

Peter Fei explains that his trading machine operates as what NASDAQ requires-a keyboard input, one at a time. At this time, the trading market was active and machines were busy. Peter's program is trading so fast that the input device is like a fully automated machine gun that keeps opening fire. As transaction orders flood in, the handle hangs on the keyboard, and the noise is so loud that the conversation may even be overwhelmed. Every time the machine stops, it seems to be quiet for a while. Who knows that it will start again in a twinkling of an eye, and more orders will pop up than last time. This entire transaction is another amazing detour by Wall Street's smart people on the rule.

"He doesn't like this machine very much ." Peter Fei recalled.

Peter thinks this is no big deal. He also proposed to get a doll model in front of the singularity to knock on the keyboard. This is a joke, but Peter is willing to do the same. However, Jones has been holding his face.

Jones shook his head and Peter Fei made a grimace. He created the world's fastest-running transaction machine, and he expected it to face the fate of being demolished. The NASDAQ employee pondered for a few minutes and then walked out of Peter's office without saying a word. Peter's worst plan was that NASDAQ banned his invention from trading. But Jones didn't come back, and Peter's worried phone was not called. His exchange is intact. Peter started out with less than $0.1 million a few years ago and earned $1987 in 50 million.

In 1987, Peter was still an insignificant member on Wall Street, but he was one of the leaders of the new generation of traders. These people are good at writing complex code, welding semiconductor chips, and using mathematical knowledge to explore the maze of market structures. What Peter did was theoretically simple and easy to understand, but complicated and complicated: he learned the wisdom of the smartest traders and expressed their thoughts with a series of algorithms. Peter's program contains all the factors that a good trader needs to consider when making decisions. The difference is that it takes far less time for the computer to run algorithms, verify prices, and execute exchanges than for manual operations.

More than Peter Fei beat the market with software, code, and high-speed computers. However, Peter's invention (whether it's a metal plug that beats the keyboard or a transmission line that steals data) has triggered a revolution. Today, 60% of transactions are automatically executed by computers without real-time supervision or few supervision. Peter's story on Wall Street is unique. He is not an experienced financial tycoon who hired programmers to expand his field of dominance, nor is he a Wall Street player who expects to gain an advantage in the financial market by self-learning programming. What makes him different is that he is a programmer and a good programmer. He was a programmer long before he understood the principles of stock options and why the stocks of different companies were consistent.

In this way, Peter has used his programming skills, mathematical knowledge, and the ability to write complex code to create layered algorithms, revolutionizing a very unfamiliar field for him: the Wall Street exchange. This disruptive hacker paradigm became popular around the world at the end of the 20th century and started the 21st Century: first, a skilled computer code and algorithm engineer was interested in a new field, cultivate your skills in this field, then apply computer science, let code snippets imitate previous operations, and beat countless companies, undermine industry standards, and beat the old forces of the industry, this revolutionizes the entire industry. Building algorithms to imitate, surpass, and ultimately replace humans is the most important capability of the 21st century. Due to the dramatic increase in people with such capabilities, work will gradually disappear, life will change dramatically, and rules will be rebuilt in all walks of life. This has happened, and this trend will continue. This trend also seeks benefits like other trends in history. That's why it started on Wall Street, largely thanks to the Hungary immigrant.