Banjax wrote on 19. Jan 2011 at 19:27:



Yes, in general terms I would agree with that BJ but I would stop short of condemning an entire industry.

I think the trading floors (and ancillary arms) of this incarnation of the Stock Exchange have indeed shown us how many working within their portals (and financial sector in general) deviated from sound responsible activity when the prospect of great wealth was apparent and regulation lax.

We must never forget that we need a sound, imaginative financial sector but common sense dictates that this must be well regulated.

Desperate Den wrote on 19. Jan 2011 at 20:07:


The original Financial Services Act was introduced in 1986 to counter an element of unregulated trading on the market floors. However, trading in those days was very simple...and thus easy to police, once the law was enacted.

Ironically, it was not market floor trading that created the current problem but rather its successor - electronic trading. Once computers became widespread, trading became much cheaper (no need to pay commissions to "real people" on the trading floors), and much more accessible. Business thus mushroomed. On top of this, computing power enabled much easier and faster credit transfers around the world which, in turn, also led to increased business. Furthermore, derivative contracts - which (pre-computer days) would have required the establishment of a new trading floor - could now be set up cheaply within a short time frame on a server. Additionally, the old commodity futures markets - which featured contracts based on physical supply - soon became eclipsed by new cash settlement contracts in financial securities; initially gilts, bunds and the like, but latterly in debt instruments.

Around the turn of the millennium, banks and non-banking financial institutions began to hire "geeks" to devise computer trading programs which analysed risk/return characteristics and effectively did the necessary buying/selling without human interference. Indeed, it has been suggested that one such algorithm, used on Wall Street, had a defective risk element which contributed to the credit crunch.   

IMHO, it was not greed that caused the problem, but rather the technological explosion. The industry became too vast, and too complex, to be adequately controlled using the methods envisaged by the FSA, the SEC and other regulatory bodies.

The endless polemics on here, based as they are on a class war against 'upstart bankers greedily fleecing the people' neatly avoids a harder, more complex and more thought-provoking analysis of the situation.   

Nickbat wrote on 19. Jan 2011 at 22:19:



Yes, I can see much of that however I would say irrespective of the technology introduced to exploit trading and financial dealings based on the instant analysis afforded by those new systems, button pushers were required to make the system work.

The entire sector was much more organically orientated with individuals deciding whether or not to make deals, shape future trends, bet on variables and so on, the technology simply allowed them to do this more conveniently.

The spur for this aggressive attitude, in my view, was the desire by many in the industry to make money not only for their employers but for themselves.

With regulation being so poor it was inevitable that many would push the boat out too far so I don't blame the machines, I blame the people using them for doing exactly what they did.

Any system that depends on what essentially is gambling faces potential difficulty and this industry, as a result, now faces the harvest of those bitter seeds.

There was obviously a fundamental disconnect between those looking at the computer monitors and making the decisions and the reality of their actions as experienced by many people on the streets outside those august establishments.

I did say in an earlier post that these were indeed complex issues and I certainly agree that no amount of ‘bank bashing’ will rectify the problems we now face.

I would still maintain however that throughout this whole sorry episode we witnessed human excess and incompetence at its worst.

Nickbat wrote on 19. Jan 2011 at 23:19:



I would be very surprised (and disappointed) should these computer programmes have been autonomous, surely there must have been some requirement for people to analyse their performance or develop the programme to further suit their requirements?  Should this not have been the case I would suggest that that omission was recklessness in the extreme.

I think the scenes played out by many of those wide-boy types typified this excess and it appeared to me, at least, that many in the 'City' existed in a bubble while being divorced from reality when attempting to experience a level of ‘living’ few had witnessed up to that point.

If gambling is/was such an intrinsic part of commerce I have to say that, in the case of the financial sector, it's very much a case of the 'beaten docket' being the victor.

Nickbat wrote on 19. Jan 2011 at 22:19:


Nickbat, imo no need for detailed analysis.. in the final case humans take the money, not the computers

so wait a second Nickbat, they're not financial geniuses after all, just drones sitting at dumb terminals having tough decisions spoon-fed to them based on algorithms they have no idea about and less control over?

i'm confused now...so are these "masters of the universe" just really greedy or really stupid? 

Nickbat wrote on 20. Jan 2011 at 11:19:


i've said plenty on the subject - i'm boring myself now