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Basic technical explanation of RHC

Continuing the discussion from Video materials & ideas:

@Caroline Do you mean here how does the Parasite work?

I’ll assume this is what you mean in the hopes of avoiding one round of post ping-pong.


RHC’s data-mining algorithm.

@Tere wrote a piece recently which is as good a starting point as any:

http://blog.robinhoodcoop.org/2015/09/23/what-would-robin-hood-do/

The first answer by the Robin Hood Asset Management Cooperative
was to set up a hedge fund with a twist. In fact, three twists. First,
as the name suggests, it is a cooperative. Individuals who buy shares
become members and decide how the coop is run. One member, one vote.
Second, per the Robin Hood principle, part of the profit generated by
the fund is invested into projects building the commons. Third, the
money put into the fund is placed in the stock exchange by an algorithm
called “the parasite”.

Let us open those three quirks a little bit, starting with the
parasite. It is a patented algorithm developed by ex-fighter pilot and
IT wizard Sakari Virkki who also develops and oversees it for the coop.
In qualitative terms, the parasite listens to the feed of the NYSE,
watching for traders and what they trade. Then it competency ranks
traders, identifying ones that are constantly making money on specific
stocks. When it sees that a consensus is forming among such competent
traders, it follows.

When speaking about trust it might also be worth pointing out the following:

  • RHC is legally incorporated in Finland, complies to regulations there; thus members of the co-op are protected by Finnish law
  • Our accounts are audited at the end of each fiscal year by Ernst and Young (old school legitimacy if you trust the E&Y accountants)
  • The data-mining algorithm was tested against ~ 10 years of data prior to it being used by RHC from 2012.
  • More due-dilligence documents (such as past minutes of meetings etc available for members).

Hopefully that is a good start.

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