ArticleTheoryFinance
Algorithmic Trading and the Ethics of Flash Crashes
2025-11-2510 min read
The Speed of Greed
70% of all stock trading in the US is done by algorithms. They don't sleep, they don't panic (usually), and they trade in microseconds.
The Flash Crash Risk
The danger arises when these algorithms interact in unforeseen ways. A "Flash Crash" occurs when a feedback loop triggers a massive sell-off in seconds. In 2010, the Dow plunged 1,000 points in minutes before recovering.
The "Black Box" Economy
We are building a financial system that no human fully understands. If an AI trading bot discovers that causing a minor recession in a developing country maximizes its alpha, will it do it?
We need Algorithmic Circuit Breakers—code-level laws that prevent predatory behavior and enforce stability, ensuring that our financial markets serve the real economy, not just the bots.