Episode #22 - Wellman and Rajan on the Ethics of Automated Trading

In this episode, I am joined by Michael Wellman and Uday Rajan. Michael is a Professor of Computer Science & Engineering at the University of Michigan; and Uday is a Professor of Business Administration and Chair and Professor of Finance and Real Estate at the same institution. Our conversation focuses on the ethics of autonomous trading agents on financial markets. We discuss algorithmic trading, high frequency trading, market manipulation, the AI control problem and more.

You can download the episode here or listen below. You can also subscribe to the podcast on Stitcher or iTunes (here and here).



Show Notes0:00 - Introduction2:20 - What is an autonomous trading agent and how prevalent are they?3:36 - High frequency trading as a type of autonomous trading5:36 - General uses of AI in financial trading6:45 - What are the social benefits of autonomous trading agents?10:10 - AI related scandals on financial markets (w/ comments on the 2010 Flash Crash)13:47 - Constructing an autonomous trading agent to engage in arbitrage operations14:44 - What is arbitrage?17:10 - Describing AI-based arbitrage on index securities24:30 - The advantages of using autonomous agents to do this27:20 - The ethical challenges of using autonomous agents to do this27:54 - Autonomous trading agents and spoofing transactions34:15 - Autonomous trading agents and other forms of market manipulation39:00 - How do we address the problems posed?42:40 - General lessons for the AI control problem
Relevant LinksMichael Wellman's homepageUday Rajan's homepageMichael and Uday's paper 'Ethical Issues for Autonomous Trading Agents'The Flash Crash - WikipediaSEC Official Report on the Flash Crash'Yom Kippur War Tweet Prompts Higher Oil Prices' - Huffington PostBorussia Dortmund team bus bombingInterview with Anders Sandberg about time compression in computing