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Yes, but the more interesting point is that as Fred suggests, this may all turn into background noise, no more significant than a vending machine. The way they are being used now is currently problematic, but all those problems could be obviated by a fully automated system. Something analogous to the way that mass production and fixed prices eliminated haggling in markets, it will just cease to be a function that needs to be performed. Theoretically all the trading houses could just be shut down and replaced by an automated system, at which point the very existence of stock market speculation as we know it gets called into question.

But that only eliminated haggling in business-customer transactions. In B2B it still goes on. I guess the equivalent would be over the counter trades.

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Originally Posted by contracycle

Well, I don't think the suggestion was that it would wipe out investing, but I can certainly imagine a scenario in which trading shares in the hopes of making a profit no longer works, and idea of people making a living trying to do so is just redundant as the buggy-whip makers. That of course wouldn't prevent someone investing in a company, it just wouldn't necessarily need a human agent to do it.

You're mixing things - Brokering (i.e. the use of an agent to buy shares/invest) is already subjected to modernising forces and, to a large extent, is already automated. Hence, brokerage fees have done nothing in the past 20 years but coming down...

Investing/trading is a different thing. Here too automation is occuring and can be extremely useful but it doesn't change the fact that, at some point, someone need to decide whether to invest or not...

For example, part of my job is to actually advise clients as to whether the time is good to invest in some automated systems or others... That is to say whether the market conditions are right for a particular system or another. Strategies such as convertible arbitrage, event driven (another form of arbitrage strategies) or statistical arbitrage - All of those require specific market environment and 'work' better or worse depending on said 'environment'.

All manners of arbitrage strategies went deadly wrong during the 2007-8 crash when correlations went towards 1...

These days, they even summarise the whole thing with "risk on, risk off" - That is to say, if "risk is on", the environment is deem safe and stable enough for all those strategies to be implemented. If risk is off, the macro concerns are overwhelming everything, correlations are shooting up and the only refuges are CHF, maybe Gold and (so far) Treasuries...

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