There are two types of technology:
- Good (does exactly as wanted, with no hassle)
- Primitive (all the rest)
This classification has been instilled into me by my wife.
The stock market is primitive.
Current stock markets are not much different than when the New York Stock Exchange was the shade of a buttonwood tree.
Figure 1: Buttonwood tree phase of NYSE (via Wikipedia)
We now have at our command amazing machines. Perhaps there are some machines that can be glued together to produce a better market mechanism.
One of the primary tasks of a market is price discovery. I find it hard to believe that this is done efficiently now. Flash crashes seem a counter-example. It isn’t clear that a better market would get rid of excess volatility but it might reduce it some.
Any solutions out there?
I don’t actually know what I’m asking for. I’m just hypothesizing that something better could be made.
The only idea I’ve come up with is the possibility of the market operating on discrete time rather than continuous time. When I searched for that I found this Deus ex Macchiato post on Discrete, discreet trading.
Surely there are people pondering this. Who are they? What are they thinking?