In Automate This, a book due out next month, author and entrepreneur Christopher Steiner tells the story of stockbroker Thomas Peterffy, the creator of the first automated Wall Street trading system. Using a computer to execute trades, without humans entering them manually on a keyboard, was controversial in 1987—so controversial that Nasdaq pressured him to unplug from its network. Then, with a wink, Peterffy built an automated machine that could tap out the trades on a traditional keyboard—technically obeying Nasdaq rules. Peterffy made $25 million in 1987 and is now a billionaire.
Today, automated trading bots account for nearly three-quarters of U.S. equity trading by volume. Trading houses plow millions into fiber optics and microwave dishes so their algorithms can send trades a millisecond faster than the next guys'. And although the first trading robot was built 25 years ago, most of the change on Wall Street has occurred during just the last few years. When it comes to automation, we may be in the elbow of an exponential curve.
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