You may have thought Massive Rainfall was some sort of stock exchange, except that insider trading is impossible. But it actually is [was] a social network where people could come together an interact.
That the interaction was mostly financial in nature and that you were only connected marginally by some sort of matching order system is also true. The social aspect was somewhat muted.
That it was a network should also have been obvious. Without other people there is no one to trade with. As the network grows, so does the number of people interested in your social interactions (your Orders for weather securities). Those of you in a given city will likely interact for the same group of securities. QED
But now I must admit that trading volumes on this site are small. Without the mass effect where an idea or meme takes on a life of its own and is propelled larger and further than ever before, a social network dies. So I’ve followed Ashley Madison’s alleged direction and introduced automated (or fake) entities to interact with.
Specifically, I’m getting ready to introduce High Frequency Traders (HFT’s) to increase the number of interactions (read: Bids and Asks on every Weather Derivative) to lower the spreads between those attempting to buy and those attempting to sell a derivative for a given City for a given Expiry Date. This will allow real people traders to get a [better] price on a security that may not have received attention from other people traders.
Here is the simple algorithm. Feel free to critique and offer alternatives, or game it later for “profit”.
High Frequency Traders Behavior:
- Cancel all previous Orders entered by the HFT that have not been filled
- Find all existing securities that have a weather forecast
- Enter the following Rainfall Orders:
- Bid on the Rain level [Forecast – 1, unless Forecast <= 1, then 1]
- Ask on the Rain level [Forecast + 1 unless Forecast<=1, then 3]
- Enter the following Wind Orders:
- Bid on the Wind level [Forecast – 1, unless Forecast <= 1, then 1]
- Ask on the Wind level [Forecast + 1 unless Forecast<=1, then 3]
- Enter the following Temperature Orders:
- Bid on the Temperature level [Forecast – 1, unless Forecast <= 1, then 1]
- Ask on the Temperature level [Forecast + 1 unless Forecast<=1, then 3]
- Add to list of Orders entered by the HFT
The purpose of this HFT is for market making – should anyone worry I’m violating the Volcker Rule for financial institutions.