David Silverman Commentary on February 5: We are a “master and slave to the system”


Jim Kharouf
ssdf
I read the JLN essay about the events of February 5. I had heard many of the rumors that quickly emerged in the aftermath of the carnage and, as always the case in these types of situations, wasn’t sure what to believe.
So, first, congratulations on the incisive and important reporting. It’s scary to consider how vulnerable the FCM community—and by extension, the entire industry—is to these periodic shocks; especially since the previously rare black swan sighting has become an increasingly regular occurrence.
I suppose it’s possible to look at February 5 in a positive light. After all, every FCM that suffered losses was able to quickly recapitalize. But, what about the next time? And the next and the next?
In running a proprietary trading firm and broker-dealer, dealing with risk management is at the center of my daily concerns and, undoubtedly, the most important thing I do. And I can attest there are no simple answers to any of the questions your essay raises.
I also want to commend you for your comments at the end of the essay. Markets crave efficiency. So we use technology as a tool to maximize profit and mitigate risk. But, as you point out, it is individuals who create and utilize the technology that determine outcomes. And the backpack analogy is quite apt. Whether one acknowledges it or not, we all carry some portion of the burden of responsibility.
Every one of us is both a master of and slave to the system. And when you consider how little we actually know about the random forces of supply and demand, our inevitable reliance on heuristics to guide decision making and the unfortunate truism that some noticeable percentage of traders are bad actors, it’s remarkable the market functions as well as it does.
David Silverman
CEO
Alpha Trading L.P.
John Lothian Newsletter
Today's Newsletter

This Vegan Billionaire Disrupted the Crypto Markets. Stocks May Be Next; ‘Dramatic’ Round of Regulation Seen Coming for Cryptocurrencies
This Vegan Billionaire Disrupted the Crypto Markets. Stocks May Be Next; ‘Dramatic’ Round of Regulation Seen Coming for Cryptocurrencies
We visit more than 100 websites daily for financial news (Would YOU do that?)
Now Read This
The Richness of Giving – A John Lothian Commentary from 2012 – This is John Lothian
The following is a commentary written in 2012 for the John Lothian Newsletter titled "The Richness of Giving." It is produced here as podcast. Last week, the last thing I did before taking off for Florida on vacation was to speak at the memorial service for my friend...
FIA Boca-V: In the Age of Surveillance Capitalism
Rana Foroohar, global economic analyst and Financial Times columnist, gave a fascinating presentation to FIA Boca on Wednesday on surveillance capitalism that melded finance with global politics and foreign affairs as well as some history, current events and a little...
FIA: Walt Lukken Kicks Off Boca-V From His Washington, D.C., Office
Walt Lukken kicked off the FIA Boca-V conference, not from a stage in Boca Raton, Florida, but from his office in Washington, D.C. He was dressed in a dark jacket and pink tie. Normally, we are surrounded by pink at the 95-year-old Boca Resort. His opening remarks...
John Lothian: A Futures Trader’s Confession
All the Ways I Have Traded Futures Over the Years I was brought up as a futures trader and the people I knew were futures traders. The people at my first industry-related job that I listened to on long car rides or on the radio talked about futures. The people I...