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At Cermak

Donald MacKenzie: Cermak Data Centre, 4 December 2014

... A data centre​ is a room or an entire building housing computers, network connection equipment and telecommunications links. Many data centres are built for the exclusive use of just one company, such as Google, but others host – and interconnect – systems belonging to many different users. One of the world’s largest multi-user data centres was once a high-volume printworks ...

On ‘Spoofing’

Donald MacKenzie: Spoofing, 21 May 2015

... On 21 April​ , the financial trader Navinder Singh Sarao was arrested in West London. The US authorities are seeking to extradite him to stand trial in Illinois after charges were issued against him by the US Department of Justice. The DoJ alleges he was in the habit of ‘spoofing’ futures markets, by entering orders without genuinely intending to buy or sell, and that this contributed to his trading profits of about $40 million between 2010 and 2014 ...

Must Do Better

Donald MacKenzie: Why isn’t banking cheaper?, 5 May 2016

... Sometimes,​ the most important – and perturbing – insights make their way into the world without fanfare. As yet, few have picked up on an analysis by the New York University economist Thomas Philippon of the history of the unit cost of financial intermediation. The unit cost is a measure of the efficiency of the financial system, and Philippon tracks its level in the United States since 1884, the time of pens and paper ledgers, when a ‘computer’ was still a human being, equipped at best with a mechanical calculator ...

What’s in a Number?

Donald MacKenzie: The $300 Trillion Question, 25 September 2008

... found it, indicate just how important Libor is to the world’s financial system. On 23 October, Donald MacKenzie writes: My article on Libor went to press just before Lehman Brothers filed for bankruptcy and governments in the US and Europe had to intervene to avert the collapse of much of the global banking system. As the article explains, Libor ...

Short Cuts

Donald MacKenzie: Wall Street’s Fear Gauge, 25 January 2018

... to press, the VIX was 9.8. It has been low for many months, and shows no clear sign of increasing. Donald Trump would no doubt attribute the low readings to investors’ confidence in his leadership. But I have my doubts. There is an alternative explanation. Heisenberg’s uncertainty principle is often taken to mean that whenever you measure something, you ...

Humming, Gurgling and Whistling

Donald MacKenzie, 11 December 1997

Engineering the Revolution: Arms and Enlightenment in France, 1763-1815 
by Ken Alder.
Princeton, 494 pp., £45, April 1997, 0 691 02671 8
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... In July 1785, Thomas Jefferson, then American Ambassador to France, paid a visit to the dungeon of the Château de Vincennes. Its three-metre-thick walls had previously imprisoned Diderot and the Marquis de Sade. Now, however, it housed the workshop of a gunsmith, Honoré Blanc, and a dozen assistants. As Jefferson watched, Blanc sorted into bins the pieces of 50 musket flintlocks: ‘tumblers, lock plates, frizzens, pans, cocks, sears, bridals, screws and springs ...

Wasting Assets

Donald MacKenzie, 23 January 1997

... It always helps to see the ordinariness of things. Despite the end of the Cold War, nuclear weapons remain very un-ordinary in the popular mind. The world’s nuclear arsenals still contain over twenty thousand warheads. Yet nuclear weapons are an ordinary technology and can, like other technologies, become obsolete. They can, perhaps, be abolished ...

What’s in the bottle?

Donald MacKenzie: The Science Wars Revisited, 9 May 2002

The One Culture? A Conversation about Science 
edited by Jay Labinger and Harry Collins.
Chicago, 329 pp., £41, August 2001, 0 226 46722 8
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... For nearly a decade, heated debates about science have split academia and sometimes spilled onto the pages of newspapers. Although the ‘science wars’ were well underway by 1996, they came to wider attention in that year when Alan Sokal succeeded in publishing his brilliant pastiche in Social Text. Sokal’s hoax implicitly condemned – and a fair number of further books and articles raged against, often, alas, without Sokal’s wit – views of science akin to the following: modern science ‘resembles much more a stock-market speculation than a search for the truth about nature’; scientists ‘do not find order in nature, they put it there’; ‘the picture of the scientist as a man with an open mind, someone who weighs the evidence for and against, is a lot of baloney’; ‘modern physics is based on some intrinsic acts of faith’; ‘at any historical moment, what pass as acceptable scientific explanations have both social determinants and social functions ...

Just how fast?

Donald MacKenzie: High-Frequency Trading, 7 March 2019

... About​ half of all buying and selling on many of the world’s crucial financial markets is now automated high-frequency trading. HFT is ultrafast. Whenever I speak to someone who might know and be prepared to tell me, I ask them just how fast that currently is: in other words, what’s the minimum time interval between the arrival of a ‘signal’ – a pattern of market data that feeds into an HFT algorithm – and an HFT system responding to the signal by sending an order to buy or sell, or cancelling an existing order? When I first asked, in 2011, the answer was five microseconds: five millionths of a second ...

Fear in the Markets

Donald MacKenzie: The ways in which ‘finance theory’ becomes part of what it examines, 13 April 2000

... The investment partnership Long-Term Capital Management was set up in 1993 by John Meriwether, previously a successful bond trader and then senior manager at the US investment bank, Salomon Brothers. Meriwether recruited to LTCM, from Salomon and elsewhere, an impressive team of experienced traders and specialists in mathematical finance. Much of its trading was with leading banks, and it largely avoided risky ‘emerging markets’, preferring well-established ones such as those in government bonds of the leading industrial nations ...

The Blindfolded Archer

Donald MacKenzie: The stochastic dynamics of market prices, 4 August 2005

The (Mis)behaviour of Markets: A Fractal View of Risk, Ruin and Reward 
by Benoit Mandelbrot and Richard Hudson.
Profile, 328 pp., £9.99, September 2005, 1 86197 790 5
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... A lycée in Lyon, 1944. A young Polish refugee is hiding in the school. His identity papers are forged, and deportation to the death camps may await him if he is caught. His attention, however, is not on the dangers outside but on a mathematics lesson. When he first started taking the classes, ‘he sat uncomprehending before the meaningless words and numbers on the blackboard ...

The Imagined Market

Donald MacKenzie: Money Games, 31 October 2002

Machine Dreams: Economics Becomes a Cyborg Science 
by Philip Mirowski.
Cambridge, 670 pp., £24.95, February 2002, 0 521 77526 4
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... I’ve started giving my students money. Not to bribe my way to favourable teaching reviews, but to provoke reflection about the relations between economic and sociological views of human beings. The money is used to play the ‘ultimatum game’. A large class divides itself into pairs, who must not be friends or acquaintances. Each pair collects ten 5p coins ...

Zero Is a Clenched Fist

Donald MacKenzie: Trading from the Pit, 1 November 2007

Out of the Pits: Traders and Technology from Chicago to London 
by Caitlin Zaloom.
Chicago, 224 pp., £18.50, November 2006, 0 226 97813 3
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... The new financial trading floor of the Chicago Board of Trade is a striking sight, and Caitlin Zaloom describes it well. Opened in 1997, it occupies a ‘huge stone block’; the trading floor itself is ‘the size of Grand Central Station’, and has no windows or even a public entrance. The walls are ‘unadorned granite, shiny, cold and imposing’, with huge electronic displays of prices, index levels and interest rates running across the top ...

How to Solve the Puzzle

Donald MacKenzie: On Short Selling, 5 April 2018

... It was​ in the mid-1980s that the short seller James Chanos first realised he was being investigated. People were ‘going through my garbage’, he says. They didn’t find anything incriminating: Chanos lives a ‘nice quiet yuppie existence’, said one of the private investigators, whose report ended up in the hands of the Wall Street Journal ...

The Magic Lever

Donald MacKenzie: How the Banks Do It, 9 May 2013

... Three years ago, the Bank of England set out to calculate a figure that does more than any other to shatter banking’s preferred image of itself. The figure made its first, understated appearance in March 2010, when Andrew Haldane, the Bank’s Executive Director for Financial Stability, included it in a talk in Hong Kong, then reappeared later that year in a chart buried at the back of the December issue of the Bank’s Financial Stability Report ...

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