John Seely Brown and High Speed Trading

"There's potential for a lot of mayhem once bots are introduced on a wide scale, a researcher concluded. The research suggests that frictionless markets, run by rationally calculating bots, may not be the efficient economic panacea  some have hoped for. Social friction and "inertia" may usefully dampen volatility and increase stability. De Long and Froomkin even suggest that such frictionlessness might disable the "invisible hand". If not actually producing  good, at least the invisible hand prevents the pursuit of private interests from doing harm. Assumptuons which underlie the microeconomics of the invisible hand, DeLong and Froomkin conclude, fray badly when transported to the information economy". That was John Seely Brown in 2004, from his seminal book "The Social Life of Information" At the time he wrote, floor-based open-outcry securities trading was already under attack, but it was nowhere near the current state of massive automated  trading based on micromovements in the market. The automation of the markets has led to a premium not only for information (always at a premium) but for bandwidth and speed, neither of which contributes to transparency, stability or confidence in the markets. Recent SEC investigation into high speed trading can only help but point out these faults, regardless of what the result may be. High speed trading is not, at base, an information issue, but it is one in which the social context of information (faith in market integrity) matters tremendously. No one advocates for a return to the open cry floor trading days - but neither should we look at them as having nothing to teach us.