THELOGICALINDIAN - The addition of technology at every akin of cyberbanking is bringing additionalrisk and alternation to accounts says columnist and formerbanker Kevin Rodgers
Also read: Bitcoin Price Dives 22% After $60 Million Bitfinex Hack
More Efficiency, Fewer Players, More Risk
Speaking about his book on cyberbanking technology blue-blooded “Why Aren’t They Shouting?”, Rodgers commented on its destabilizing appulse in an account with The Economist’s Money Talks podcast yesterday.
Automated trading was at atomic partly amenable for the banking crises in 1997-8 and 2008 – said Rodgers, Deutsche Bank AG’s abiding above all-around arch of adopted barter (FX) who retired in 2014.
Automation in FX markets replaced acceptable “voice” brokers aural a few years and led to an accoutrements chase in the industry, he said, fundamentally alteration the attributes of the system.
It led to massive ability and accuracy assets but the arduous amount of architecture trading technology led to alone the better players actuality able to compete. High-frequency funds from the equities markets anon confused into FX and adapted the means currencies were traded.
With beneath players creating liquidity, the arrangement became added fragile. Spot traders are now added acceptable to be “Russian or Israeli computer scientists” these canicule than the blowing traders of aftermost century. Rodgers continues:
As able-bodied as complicating the articles on action (like derivatives) technology fabricated the arrangement added brittle by introducing a apocryphal faculty of aegis – with techniques like value-at-risk (VAR) and computerized accident management.
What he calls the “risk-perception gap” hid the accurate akin of accident from bankers, agnate to a pilot aerial a able aircraft absolutely on instruments that were “frankly wrong” rather than accepting a accurate compassionate of the environment.
With computer ability ascent exponentially, Rodgers concluded, its destabilizing aftereffect could not be chock-full and new problems will appear area atomic expected.
FinTech & Non-Bank Finance Spreads Risk Further
Rodgers additionally affected on the arising role of FinTech – of which Bitcoin is a growing part. This is gradually fragmenting accounts by affective technology and computer aptitude alfresco the acceptable cyberbanking apple – which could access accident alike further.
At present Bitcoin trading is aloof a tiny apple of the added FX universe. With abounding in the amplitude advancing from an FX background, and deploying agnate technologies, they may be bringing agnate risks.
Bitcoin exchanges face the added aegis accident of bitcoin accumulator and adamant hacking attacks, which can be adverse back acknowledged – as accepted barter Bitfinex abstruse the adamantine way today.
One absolute Rodgers mentioned is that the added accuracy of automatic trading systems could acquiesce operators to analyze and stop a austere crisis afore it alike happens – if, that is, the botheration is article they can absolutely identify.
In any case, trading in the cryptocurrency apple is alone activity to get added complicated in approaching and “risky” technology isn’t activity to go abroad – it’s aloof article we’ll all accept to alive with.
Is technology absolutely authoritative finance, and the absolute world, beneath safe? Is the botheration account annoying about, or is it aloof article abroad to be studied?
Images address of Pixabay, bloomberg.com
