CONTEXT

June 18, 2014

Flash Boys

Brad Katsuyama

Brad Katsuyama

I’m guessing you probably don’t need to read this, because like most people you get that the stock market is rigged in favor of insiders.

The banks, the hedge fund managers and – the latest manifestation of shell-game operators – the high frequency traders are busy skimming the cream off trading and amateurs never see it.

Although, if you are at all interested in the details of what fiber optic cable and computerized trading has meant to exchanges, then Michael Lewis is the guy for you and Flash Boys is a virtual encyclopedia of all the  tricks Wall Street has been able to create for the new century.

But as one of the players points out, the history of the stock exchange is a history of scams, rules against scams, new scams, new rules and so on, pretty much from the get-go.

(In case you missed the news, the book is mostly about the ability of high frequency traders to intercept electronic trades and buy and sell the stock at higher price – all in microseconds.  Every trade becomes a sprint and the stock you wanted at $10 a share is $10.50 by the time you get to it. The result is billions in profits for the HFTs.)

Every book should have a hero and Flash Boys has a great one: Brad Katsuyama, a trader from the Royal Bank of Canada, who exposed the scam and went on to establish his own very transparent exchange.

What Lewis has missed, I think, is an in-depth look at what it means to a human being to confront an evil and to be, seemingly, the only person in the world who cares.  (When Katsuyama revealed his findings to banks, for instance, their first reaction was ‘How can we do that?”)  It has to be the loneliest feeling in the world, but there isn’t much here about that.

Bottom line, a great read, but maybe more corroboration than you can stomach of the adage that behind every great fortune is a great crime.

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2 Comments »

  1. Great post.. Crazy stuff going on on wall street for sure. 😉

    Comment by ninachat — June 18, 2014 @ 3:31 pm | Reply

  2. Scary what the takers can figure out & how they can do it so heartlessly. Blog on!

    Comment by avery zia — June 19, 2014 @ 7:30 am | Reply


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