Halloween is right around the corner, and will bring the annual flood of Draculas, Frankensteins and Zombies along with it. These ghoulish characters have gone global, along with the celebration of Halloween, but did you know that Halloween has a long tradition in Ireland?
For many, many years, we’ve celebrated Oíche Shamhna, which translates to ‘Autumn Night’ and represents the last night of the year on the old Gaelic calendar when the Harvest season gives way to dark Winter. Tradition has it that on the night of Halloween, the souls of all our dead ancestors emerge from under the earth and walk among us for just one night. The masks and costumes we associate with Halloween were originally intended to confuse any vengeful spirits, and keep one safe and anonymous.
Now what in the world has any of this got to do with Corvil?
Well, it is true that our roots are in Dublin and we do get our name from the Irish word for mosquito. But this is really about time, or more specifically the nexus of time, uncertainty, options and information.
In today’s electronic trading markets every financial instrument represents the right to receive some future cash flow. Because these cash-flows are in the future, there is always uncertainty about the outcome, which is affected by the options taken. To manage uncertainty and improve our options requires timely information.
Not too long ago we had no electricity to light our way in the dark night, and no understanding of infectious diseases or the real origin of comets. In any year where the harvest was poor, simply surviving to the following Spring was the real concern. Most people only had limited “fixed assets” in the form of livestock, and so had very few options for trading.
In today’s electronic marketplaces a high speed trader only ‘owns’ a security on a scale of microseconds. With the vast amount of available information and the array of hedging options at our disposal, you might think the uncertainty or risk is vanishingly small. And it is—in theory. But just this month we saw another ‘flash crash,’ this time on sterling/dollar rates in currency markets. Some reports pointed to key speeches on Brexit as the trigger, and others suggested an algorithm called Cowpox was to blame. Whatever it was, the key point is that this non-linear ghost in the machine could wreak havoc and disappear again without a trace.
In our early history the timescales were measured in days or seasons and the ‘ghosts’ were out in the dark forests. In today’s electronic markets the key events happen in machine-time and the ghosts are ‘in here,’ with us, in our dense thicket of application and network services. These ghosts can only be detected and understood by other machines that are equally lightweight and fast to react.
The prime brokerage firms provide their clients with trading algorithms that have quite scary names like Chameleon, Stealth and Guerilla. It seems clear that even the major investment banks consider it safe practice to go about wearing a mask as well.