In India, Lord Ganesha's statues seem to have pretty much a universal presence in the offices of anyone who has anything to do with the equity markets. However, it isn't an Indian company that claims to have set up a trading system based on Lord Ganesha's ride. Yes, you should now do a double-take and read that sentence again. Today is not April 1, and yet I'm going to tell you all about a company called Rat Traders. Rat Traders is based, as far as I can tell, in a Post Box in the Cayman Islands, but then, so is Alibaba Group Holdings, so that's not really such a negative point nowadays. As a matter of fact, unlike Ali Baba, Rat Traders' key employees could actually fit inside a post box.
Rat Traders' business is simple to describe. They train rats to trade on the markets. Then, they select the ones who turn out to be the best traders and sell those rats' 'trading signals' to anyone who would like to make use of them. So how does this work? The big idea that the CEO and Founder Michael Marcovici (who is human) has had is the 'sonification' of trading data. Basically, trading data is translated to sounds whose pitch and volume changes according to the direction, speed and volume of the changes in the underlying asset price.
The rats operate out of these boxes which are apparently something called Skinner boxes that are used by scientists to study rat behaviour.The only difference is that Rat Traders' boxes are glass sided and air conditioned, presumably because these are Wall Street rats and not scientist rats. They need comfort and they need the illusion of having a corner office. Anyhow, the rats listen to the sounds generated by the trading and then press from a selection of buttons, each of which is linked to an actual trading action. If the action leads to a gain, then the rat gets food. If it leads to a loss then the rat doesn't get food. It's just like a human trader's job, more or less. In fact, it's hardly distinguishable from any knowledge workers' job.
During the training phase, all this is done on historical market data. The initial training lasts for 12 weeks, after that the best traders are separated out and given further training with more nuanced sound signals. Another 12 days of this and they are ready for the job. The Rat Traders website gives extensive information on the sonification process and the individual traders' track record.
As it turns out, the trader who has the best track record, especially in gold and USD futures, is one named Mr. Lehman3, so there is some justice in the world, after all. Although I must admit that Mr. Morgan3 is pretty good too, as are Ms.Kleinworth4 and Mr.Warburg-Goldmann 4. The numbers in the names denotes that, for example, this is 3rd generation of the Lehman and Morgan dynasties among these traders. You see, the fast breeding and short lifespans of rats is great for rapidly building a financial dynasty. While it took the real JP Morgan some 80 years to reach the third generation, Mr. Marcovici's traders have a proper heritage going in just a few months.
So what do you think? Could this be the dawn of a new era on the markets? Well, financial inclusion is the buzzword nowadays. Taking the concept further, I think one should keep an open mind and not be biased against other species' ability to conduct technical trading. After all, how difficult can it be to recognise some sort of a pattern and press a button? Hardly something that requires any distinctly human ability, wouldn't you agree?
In fact, according to data published by Mr. Marcovici on the track record of his traders, they broadly make the right call about 50 per cent of the time. I'm open to being corrected, but isn't that much better than what most human traders are able to do?
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
