Friday, March 18, 2016

AlphaGo home, half life, T+2 down under...I (didn't) take a pill in Ibiza

Much this week has been made of the 'success' of AlphaGo.

This got me thinking about success. What is success?...in either human terms or machine terms.

Some commentators remarked that AlphaGo made some 'unusual' moves. And these moves were at a turning point - AlphaGo thought it had the game in the bag and then it just changed gears to defend the win. i.e. The machine just wants to win...it doesn't differentiate winning by a point or running up 50 points. Bit like playing a soccer game and after scoring a goal you spend the rest of the day doing that 'off side' rule thing they do (sorry for the over simplification - but you get the point). 
AlphaGo is a win and grind. It doesn't have a killer instinct or 'match flare'. The 4th game that Lee Sedol won was based on an offensive play. The boy can play 'Big Points'. Tennis is a bit boring when it is all percentage shots.

So what is AlphaGo vs. Lee Sedol? Is it some kind of AI and neural network? I think it is a big computer with millions of data points. It peaked my interest in how it was coded and the process they went through. Unfortunately this is a paywall paper...so I haven't read it but what is interesting is all the data tables, which you can see:

Lee Sedol is one super efficient process. It doesn't look like he consumes a lot of food. My guess is that AlphaGo consumes vastly more amounts of energy (think watts) as it trawls through all the permutations of life....including the known universe of AlphaGo games. Big data to me. What Lee Sedol has done is eliminate thousands of data points that are pretty useless. He's applied his 'bounded rationality'. People forget...and forgetting can be a gift (don't carry some of that redundant clutter with you - Beats - shout out to you!) AlphaGo has a big brain. If we evolved like Alpha go I visualize an alien form with a top heavy head.
https://en.wikipedia.org/wiki/Bounded_rationality

Lee Sedol did mention that in human match play you get a lot of visual clues too - breathing, movement, gestures etc. AlphaGo has a pretty good poker face by all accounts. So under stress, AlphaGo...is not stressed. Is this good? I'm not sure. In the human world we can do some pretty powerful peak processing is a stressed environment. On minimal data points we can quickly choose, fight, flight or freeze. (OK, I might have picked option one a bit too often).

And then we get to pattern recognition. And this is where the whole AI point comes for me. What AlphaGo is magic at is playing the instruments...every instrument in the orchestra....but can he compose a melody?AlphaGo is always the same or a statistical derivation of what has gone on before. Lee Sedol is playing with the pieces - he's being creative.

Now I don't think there were many ethics in the game. But if there were, my guess is AlphaGo would have played by the rules...the coded rules (Ohhh, scary, man V machine). Lee Sedol acts on an entirely different plane.

....They collected moves from these machine-versus-machine matches and fed them into a second neural network. This neural net trained the system to examine the potential results of each move, to look ahead into the future of the game....
...AlphaGo had calculated that there was a one-in-ten-thousand chance that a human would make that move...
http://www.wired.com/2016/03/two-moves-alphago-lee-sedol-redefined-future/

Anyway, enough AlphaGo bashing. What I think is really exciting, is not the sheer industrial beauty of computing power, but rather the analysis of the processes to win. This is trying to break down emotional intelligence into a process. An ontology if you like. And it is by looking, and measuring, the process that we can begin to define limits, tolerances and possibly behaviours. This is stuff we all know, but don't accurately measure.

AlphaGo will be able to serve me a brilliant beer, no doubt. I might even shock him with an order for a G&T or a green beer on St Patricks day. There is a better than 1:10K chance he'll have the stock to hand. However, if I want to create a new cocktail, with a raspberry twist...game over.

There is a story of a famous photographer in New York who went to a dinner party. The Host greeted him and said "I have seen your photos and they are amazing! You must have a fantastic camera". Later on, during the meal, the photographer said "this dinner tastes delicious, you must have a fantastic kitchen".

Happy St Patrick's Day!
http://www.history.com/topics/st-patricks-day/history-of-st-patricks-day/interactives/st-patricks-day-by-the-numbers

Piccie:
US Bank Consolidation. Unfortunately, this did not make the cut this week.
https://image-store.slidesharecdn.com/0db28a3b-8b6d-47e4-b92e-35811c566b9b-original.jpeg

Have a great week-end.
(I won't be playing computer chess).

S
www.clearingandsettlement.blogspot.com


Blockchain

Bitcoin mining rate and half life.
The current Bitcoin reward is 25 BTC per block.
All the half life stats here:
http://www.bitcoinblockhalf.com/

I also think blockchain will introduce a whole new, nuanced, vocabulary.
For example coinbase (the field that allows the block reward) as opposed to the wallet provider www.coinbase.com
Good glossary here:
https://bitcoin.org/en/developer-glossary

For example what are the Rails that blockchain can run on?
Wht is NXT?
https://nxt.org/what-is-nxt/

Ethcore introduce parity....
....the fastest and lightest Ethereum block processing engine amongst the available clients
(their claim - not mine!)
https://ethcore.io/index.html

BitShares, Lisk Hop on Azure Blockchain Bandwagon
So, who's on MS Azure BaaS?
BitShares an open-source, decentralized asset exchange software platform
Lisk, a cryptocurrency and JavaScript-based developer platform for custom blockchains
Slock.it allows objects to be securely sold, rented or shared without a brokering agent.
Syscoin services for merchants, including escrow, digital asset storage and other buying and selling services.
Augur, an Ethereum blockchain-based decentralized prediction market platform.
http://www.eweek.com/cloud/bitshares-lisk-hop-on-azure-blockchain-bandwagon.html
This was a good slide share on blockchain from Ethereum
http://www.slideshare.net/gavofyork/basic-ethereum


Martkets

Goldman revamps electronic stock trading to catch rival
Goldman hired the tech-savvy Mahajan to revamp the business in March 2015. Since then, he has hired dozens of technologists and support staff to elevate Goldman's position in a fast-growing slice of the market and win back business from its chief competitor, Morgan Stanley.


Welcome, ASX ad NZX to T+2!

Sometimes we overlook the context of materiality and proportionality
notes: 2015 ASX did 190 million trades..in the year...for a notional of Aussie 1,112.5byn
notes: 2015 NZ did 1.4 million trades...in the year...for a notional of Kiwi 40byn.
http://www.asx.com.au/services/t2.htm
http://www.asx.com.au/documents/investor-relations/2015AnnualReport.pdf  (p68)
https://nzx.com/regulation/T2-settlement
https://www.nzx.com/files/attachments/230592.pdf
Today Chi-X (oops, now Bats) did 1byn trades for a 10 byn Euro notional

Integration of market infrastructure
This is a 'promo' clip from the ECB trying to make the EuroSystem, SEPA, Target2 and T2S, more accessible (I guess)
I'm not sure it will sway any Brexit 'out'ers or leave my local MP with an interest in Market Structures as a vote winner.
https://youtu.be/hc9ntZmB0i8

The European Supervisory Authorities (EBA, EIOPA, ESMA - ESAs) published today the final draft Regulatory Technical Standards (RTS) outlining the framework of the European Market Infrastructure Regulation (EMIR).

Duco And CME Group Team Up To Provide Innovative Data Control Service To Member Firms
http://www.thestreet.com/story/13494718/1/duco-and-cme-group-team-up-to-provide-innovative-data-control-service-to-member-firms.html


Stuff

I loved this "Dilemma" - brought a tear to my eye.
https://youtu.be/R6xLcItSJN8

I found this interesting in how a message can be 're=purposed'
https://medium.com/@MikePosner/i-took-a-pill-in-ibiza-2f7de1406c6d#.mjqcjsnt6
...to this...
https://youtu.be/foE1mO2yM04

Fracking : An English duck that will never fly
....Because burning gas is more efficient than coal, it provides a 50 per cent advantage in terms of emissions of CO2 emitted per unit of energy. However that is only half the story because of the methane that escapes into the atmosphere during the exploration, production, storage, and distribution phases of the gas life-cycle....
Methane is the second most important greenhouse gas with a Global Warming Potential (GWP) 87 times greater than an equivalent mass of CO2 over a 20 year time frame. If fugitive emissions of methane exceed 2 per cent of production, then gas is no better than coal from a climate change perspective.


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Tuesday, March 8, 2016

LSE, The rise of Ether, Bye bye Chi-X...and the best thing out of Melbourne


LSE in the news and as ever, more news and reports on blockchain than one can read in a week.

In the past I've levied 2 criticisms at the LSE. One, that is an incumbent institution and Two, that the sum of the parts do not unlock the value of the group. Time to re-visit this.

First of all, I'm a little surprised by how little credit Xavier is getting. Lets look at the share price under his tenure. At MiFID (Nov '07), LSE was around STG 17+ a share. Post MiFID Rolet comes in, after LSE shares have had a steady fall with the fan fare of competition to circa STG 7 a share. Now, it is circa STG 28 (and rising...some say even STG 32 is attainable)...and the loss of market share has been contained.
So, respect to Xavier and his advisors. They've obviously been listening to their customers.

So, One. From 2009, with the Millennium acquisition LSE started a journey of not behaving like an incumbent. And that journey continued with, Two, a tidying up of the sum of the parts...grabbing the LCH stake and going from a board representative to an outright owner, likewise with FTSE (alongside the background of the benchmarking hype). I must say I'm surprised by the full value that has now been 'unlocked' from the LSE holdings.

I am also surprised by how little press I see about Euronext. With LSE in play...and a debate about Brexit on the cards....I think Euronext offers great value to those that walk away empty handed from the LSE dance. A real Eurozone play..(read ECB "location policy")...and foothold (all the more so if the Clearnet stake is divested).

Some other bits of history:
NYSE Group, owner of the New York Stock Exchange, offered €8 billion (US$10.2b) in cash and shares for Euronext on 22 May 2006,
In December 2012 Intercontinental Exchange announced plans to acquire NYSE Euronext, owner of Euronext, in an $8.2 billion takeover

LSE chief Rolet to retire after Deutsche Börse merger
London Stock Exchange Group: A timeline of the deals and attempted transactions

He joined the Board of the London Stock Exchange in March 2009, and became CEO in May. Under his leadership, the London Stock Exchange Group acquired MillenniumIT (2009),Turquoise Holdings Ltd (2010), FTSE Group (2011), TRS (2011), GATElab Srl (2012), EuroTLX Srl (2013),LCH.Clearnet (2013), Bonds.com (2014), ExactPro (2014) and the Frank Russell Company (2014) from Northwestern Mutual, the Asset management arm of which was sold in October 2015 to TA Associates and Reverence Capital Partners. In October 2015, LSE Group launched Curve Global, a new Futures Exchange co-owned with Barclays Bank, Bank of America, Citi, Goldman, Sachs, Societe Generale and the Chicago Board Options Exchange.

(Poor old Proquote got ejected along the way)

LSE share price history (MiFID came into effect Nov 2007....and you can see the LSE share price slide from that point.)
or

DLT / Blockchain

And so it happens....Ether has overtaken the marketcap of Ripple (leaving Ether second only to bitcoin).
Look at Ethers value appreciation here.
(My advice has been to switch from Bitcoin into Ether)
http://coinmarketcap.com/

No, Bitcoin is not the future of securities settlement
http://www.clearmatics.com/2015/05/no-bitcoin-is-not-the-future-of-securities-settlement/

Deloitte’s seventh annual Tech Trends report identifies eight trends that are likely to disrupt businesses in the next 18-24 months – from blockchain to augmented reality, the Internet of Things, socially responsible applications of technology and more.http://www2.deloitte.com/global/en/pages/technology/articles/tech-trends.html#

Banking on Blockchain: Charting the Progress of Distributed Ledger Technology in Financial Services.
A new paper produced by Finextra in association with IBM explores the progression of blockchain.
(this paper requires registration)
http://www.finextra.com/surveys/survey.aspx?surveyguid=32e19ab4-2d9c-4862-8416-d3be94161c6d

Deutsche Bank calls for co-operation with fintech firms on B2B services.
In a new whitepaper (PDF), the German bank acknowledges that over the last decade a host of non-bank players, from PayPal to Stripe to Apple Pay to Bitcoin, have upended the payments market, turning models on their head.
Full paper here:

Global regulators to probe fintech threats to financial stability
The Financial Stability Board is to evaluate the potential for systemic risk posed by emerging innovations in financial technology
National regulatory bodies have so far taken a softly-softly approach to the growing fintech sector for fear of stifling potentially beneficial creative innovation.

FCA to extend Innovation Hub; advance research into blockchain tech
The discussion, inevitably, turned to the application of distributed ledger technology in financial service, with Woolard setting out some of the regulatory and consumer issues that will need to be discussed as the technology evolves.
"For example, how individuals gain access to a distributed network and who controls this process, along with what data security exists for users are vital considerations for us as a regulator," he says. "The FCA continues to monitor the development of this technology but is yet to take a stance until its application is clearer."

IOSCO Securities Markets Risk Outlook 2016
International securities regulatory body Iosco has identified the disruptive threats from technological innovation as a key risk factor facing financial markets in 2016.

Markets

BATS drops Chi-X name in global rebrand
http://www.bloomberg.com/news/articles/2016-02-22/europe-s-biggest-derivatives-exchange-halts-trading-on-glitch

IEX Sick of SEC Delays on Exchange Approval
....These “flash boys” are starting to lose their patience....
http://nypost.com/2016/02/19/iex-sick-of-sec-delays-on-exchange-approval/

NYSE Embarks on High-Stakes Technology Shift for its Exchanges
....moving its markets on to a single software platform called Pillar, a move that its owner Intercontinental Exchange Inc. hopes will allow it to shed its image of having clunky, out-of-date technology...
http://www.bloomberg.com/news/articles/2016-02-19/nyse-embarks-on-high-stakes-technology-shift-for-its-exchanges

SEC to focus on asset management, disclosure, market structure in 2016
In equity market structure, the SEC will finalize rules on the oversight of active proprietary traders and on alternative trading systems. It will also work to enhance order routing disclosures and the risk controls on trading algorithms
There is limited time for the commission to accomplish any goals, with the administration of President Barack Obama coming to an end in less than 12 months. Traditionally, the head of the SEC, a politically appointed position, is replaced when a president leaves office. The SEC is currently down two members from its full complement of five.
http://www.reuters.com/article/us-usa-sec-focus-idUSKCN0VS1OJ

Esma Pledges to Ease Reporting Burden on Trading Firms
ESMA is examining ways it can standardise trade reporting requirements, amid continued complaints that firms are being forced to do the same work several times over to satisfy different rules. The regulator has asked its Market Data Standing Committee to consider how to reduce the burden on the finance industry in the wake of a swathe of different reporting requirements, contained in legislation such as the Markets in Financial Instruments Directive, the Securities Transaction Financing Regulation and the European Market Infrastructure Regulation. Finance firms complain that the rules require them to provide the same information in subtly different formats, duplicating work and pushing up costs.
*** Sorry, this story behind a paywall.

JPMorgan's ‘London Whale’ Surfaces to Say '12 Loss Not His Fault
In his letter, Iksil said the government’s decision not to prosecute him helps show he’s not to blame. In July, the U.K. Financial Conduct Authority abandoned a proposal to fine Iksil 1 million pounds ($1.4 million) and refrained from banning him from the industry.

Full letter available here:

Morgan Stanley scales back equities financial technology investing group


Stuff

USB Type-C: One cable to connect them all

A lovely blast from the past...
The Seekers - Morningtown Ride (1964 - Stereo, enhanced video)https://youtu.be/M-RkC6MYT2E
...and one of the best things I know to come out of Melbourne!
https://youtu.be/HDr1lI_4Co0




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