Those who fear that computers are on the path to world domination can take heart: machines still need the law to protect them from being outwitted by humans. That is the lighter lesson of two Norwegian day traders’ conviction for market manipulation. What the conviction more importantly reveals is the misfit between market abuse laws and the realities of finance.

The enterprising traders, Svend Egil Larsen and Peder Veiby, independently discovered a predictable pattern in an automated trading algorithm that Timber Hill, a unit of a US broker, used for several thinly traded Norwegian stocks. When they placed a bid, the algorithm would fill the order and lift both its bid and offer price. By buying progressively smaller batches, the traders drove Timber Hill’s prices up before selling the stocks back to it. The two traders made some ￡40,000 in five months.

Norwegian public opinion has sided with the human side of the man-versus-machine drama, but the Oslo District Court has come down hard. It found them guilty of market manipulation and ordered suspended jail terms and confiscation of profits. The outcome – based on the European market abuse directive – may be legally sound but does little to serve public interest. For there is no social gain from protecting the principals behind an algorithm of such breathtaking stupidity. No one forced them to trade in this way; indeed the aim of automated trading is to find and exploit patterns more efficiently than the outmoded humans who on this occassion bested it.