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Manoj Narang, CEO of a ] firm, argued that Lewis' book is more "fiction than fact", claiming Lewis needs a primer in HFT.<ref>{{cite news|last1=Narang|first1=Manoj|title=A Much-Needed HFT Primer for 'Flash Boys' Author Michael Lewis|url=http://www.institutionalinvestor.com/Article/3328158/Banking-and-Capital-Markets-Trading-and-Technology/A-Much-Needed-HFT-Primer-for-Flash-Boys-Author-Michael-Lewis.html#.U6ygpI1dWJg|accessdate=June 26, 2014|publisher=Institutional Investor|date=April 4, 2014}}</ref> A review by Scott Locklin asserted that the book purports to be about high frequency trading, but Lewis never speaks to a high-frequency trader.<ref>{{cite news|last1=Locklin|first1=Scott|title=Michael Lewis: shilling for the buyside|url=http://scottlocklin.wordpress.com/2014/04/04/michael-lewis-shilling-for-the-buyside/|accessdate=June 26, 2014|publisher=Scott Locklin|date=April 4, 2014}}</ref> However, in the acknowledgments section of the book, Lewis noted that "the people who work in these firms have grown more cynical about them, and more willing to reveal their inner workings, so long as their name is not attached to these revelations. As a result, I am unable to thank many of the people inside banks and high-frequency trading firms and stock exchanges who spoke openly about them". | Manoj Narang, CEO of a ] firm, argued that Lewis' book is more "fiction than fact", claiming Lewis needs a primer in HFT.<ref>{{cite news|last1=Narang|first1=Manoj|title=A Much-Needed HFT Primer for 'Flash Boys' Author Michael Lewis|url=http://www.institutionalinvestor.com/Article/3328158/Banking-and-Capital-Markets-Trading-and-Technology/A-Much-Needed-HFT-Primer-for-Flash-Boys-Author-Michael-Lewis.html#.U6ygpI1dWJg|accessdate=June 26, 2014|publisher=Institutional Investor|date=April 4, 2014}}</ref> A review by Scott Locklin asserted that the book purports to be about high frequency trading, but Lewis never speaks to a high-frequency trader.<ref>{{cite news|last1=Locklin|first1=Scott|title=Michael Lewis: shilling for the buyside|url=http://scottlocklin.wordpress.com/2014/04/04/michael-lewis-shilling-for-the-buyside/|accessdate=June 26, 2014|publisher=Scott Locklin|date=April 4, 2014}}</ref> However, in the acknowledgments section of the book, Lewis noted that "the people who work in these firms have grown more cynical about them, and more willing to reveal their inner workings, so long as their name is not attached to these revelations. As a result, I am unable to thank many of the people inside banks and high-frequency trading firms and stock exchanges who spoke openly about them". | ||
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Another reviewer asked: "Ironically, the Flash Crash itself was just glossed over. Could that be because the primary cause of that momentary blip lay in a confluence of regulatory mistakes and that it was many of the demonized ]s who actually stood fast throughout and thereby insured that the damage was a fraction of what it could have been had only the shell-shocked, traditional participants been left to respond?"<ref>{{cite news|last1=Bandeen|first1=Ian|title=Flash . . . or Fiction? Hit book on high-frequency trading lets the real villains off the hook|url=http://business.financialpost.com/2014/05/29/flash-or-fiction-hit-book-on-high-frequency-trading-lets-the-real-villains-off-the-hook/|accessdate=June 26, 2014|publisher=Financial Post|date=May 29, 2014}}</ref> | ||
An Oxford University Press handbook chapter calls Lewis's book a very readable and mostly accurate introduction into such topics as dark pools, front-running, or kickbacks, but argues that the overall picture drawn by Lewis is too gloomy.<ref>{{cite news|last1=Fleckner|first1=Andreas Martin|title=Regulating Trading Practices, The Oxford Handbook of Financial Regulation|url=http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2476950|accessdate=August 15, 2014|publisher=Oxford University Press|date=August 6, 2014}}</ref> | An Oxford University Press handbook chapter calls Lewis's book a very readable and mostly accurate introduction into such topics as dark pools, front-running, or kickbacks, but argues that the overall picture drawn by Lewis is too gloomy.<ref>{{cite news|last1=Fleckner|first1=Andreas Martin|title=Regulating Trading Practices, The Oxford Handbook of Financial Regulation|url=http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2476950|accessdate=August 15, 2014|publisher=Oxford University Press|date=August 6, 2014}}</ref> |
Revision as of 22:20, 29 October 2014
Hardcover edition | |
Author | Michael Lewis |
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Language | English |
Subject | High-frequency trading |
Genre | non-fiction |
Publisher | W. W. Norton & Company |
Publication date | March 31, 2014 |
Publication place | United States |
Media type | Print, e-book |
Pages | 288 pp. |
ISBN | 9780393244663 |
Preceded by | Boomerang |
Flash Boys: A Wall Street Revolt is a non-fiction book by the American writer Michael Lewis, published by W. W. Norton & Company on March 31, 2014. The book focuses on the rise of high-frequency trading (HFT) in the US equity market. Lewis states that "The market is rigged" by HFT traders who front run orders placed by investors.
Synopsis
The book centers on several people, including Sergey Aleynikov, a one-time programmer for Goldman Sachs, and Bradley Katsuyama, the founder of IEX, the Investors' Exchange.
Flash Boys starts out describing the new construction of Spread Networks' secretive 827-mile cable running through mountains and under rivers from Chicago to New Jersey that would reduce the journey of data from 17 to 13 milliseconds. The speed of data becomes a major theme in the book; the faster the data travels, the better the price of the trade. Lewis claims access to this fiber optic cable, as well as other technologies, presents an opportunity for the market to be controlled even more by the big Wall Street banks. To counter this disadvantage to investors, Katsuyama bands together a team that sets out to develop a new exchange, called IEX, to make the playing field for trading fairer.
The book takes a look at how technology replaced the trading floor of screaming brokers, slamming telephones and hysteria-inducing ticker tape, and how that change impacted the market.
The book concludes by observing that there is now a conventional (microwave) link between Chicago and New Jersey, and which follows an even straighter route than the Spread Networks' 827-mile cable (as microwaves always follow a direct path, whereas cables, by their very nature, must, at least occasionally, detour around physical barriers), and in the process this new link shaved 4.5 milliseconds off of the Spread Networks speed. In a very real sense, Spread Networks' victory was Pyrrhic.
Criticism
Manoj Narang, CEO of a high-frequency trading firm, argued that Lewis' book is more "fiction than fact", claiming Lewis needs a primer in HFT. A review by Scott Locklin asserted that the book purports to be about high frequency trading, but Lewis never speaks to a high-frequency trader. However, in the acknowledgments section of the book, Lewis noted that "the people who work in these firms have grown more cynical about them, and more willing to reveal their inner workings, so long as their name is not attached to these revelations. As a result, I am unable to thank many of the people inside banks and high-frequency trading firms and stock exchanges who spoke openly about them".
Another reviewer asked: "Ironically, the Flash Crash itself was just glossed over. Could that be because the primary cause of that momentary blip lay in a confluence of regulatory mistakes and that it was many of the demonized HFTs who actually stood fast throughout and thereby insured that the damage was a fraction of what it could have been had only the shell-shocked, traditional participants been left to respond?"
An Oxford University Press handbook chapter calls Lewis's book a very readable and mostly accurate introduction into such topics as dark pools, front-running, or kickbacks, but argues that the overall picture drawn by Lewis is too gloomy.
Impact
The day after the book's release the Federal Bureau of Investigation announced an investigation into high frequency trading, in particular about possible frontrunning, market manipulation, and insider trading. Though the FBI did not connect Flash Boys to the investigation, others have. New York Attorney General Eric Schneiderman also commented on his ongoing investigation into HFT and Flash Boys.
Lewis's phrase "The market is rigged" became the focus of debate. The chairwoman of the Securities and Exchange Commission, Mary Jo White, stated in Congressional testimony on April 29, 2014 that U.S. financial markets "are not rigged" in response to a question on Lewis's book.
Former New York City mayor Michael Bloomberg disputed claims made in Lewis’ book on May 2, 2014, stating in a CNBC interview that "the system isn’t rigged." Former Securities and Exchange Commission chairman Arthur Levitt commented that variation exists within the group of high-speed traders that Lewis’ book describes, saying "What is missed in the book and in the general discussion of HFT is there are some HFT traders who respect the sanctity of the investor, and some who don’t."
On May 1, the SEC announced a US$4.5 million fine for the New York Stock Exchange and two affiliated exchanges, on charges related to Lewis's book. The exchanges neither admitted, nor denied the charges.
While Lewis can only estimate the cost to investors of the abuses, he believes it is over $5 billion per year, perhaps as much as $15 billion per year or even higher.
References
- ^ Massoudi, Arash; Tracy Alloway (March 28, 2014). "'Flash Boys' starts Wall St soul searching". Financial Times. Retrieved March 31, 2014.
- ^ "Michael Lewis 60 Minutes Interview on HFT [VIDEO]". Value Walk. Retrieved March 31, 2014.
- Ross, Andrew (May 16, 2014). "Flash Boys by Michael Lewis – review". The Guardian. Retrieved June 26, 2014.
- Gapper, John. "'Flash Boys' by Michael Lewis". 21 March 2014. Financial Times. Retrieved June 26, 2014.
- Maslin, Janet (March 31, 2014). "Hobbling Wall Street Cowboys". New York Times. Retrieved June 26, 2014.
- Narang, Manoj (April 4, 2014). "A Much-Needed HFT Primer for 'Flash Boys' Author Michael Lewis". Institutional Investor. Retrieved June 26, 2014.
- Locklin, Scott (April 4, 2014). "Michael Lewis: shilling for the buyside". Scott Locklin. Retrieved June 26, 2014.
- Bandeen, Ian (May 29, 2014). "Flash . . . or Fiction? Hit book on high-frequency trading lets the real villains off the hook". Financial Post. Retrieved June 26, 2014.
- Fleckner, Andreas Martin (August 6, 2014). "Regulating Trading Practices, The Oxford Handbook of Financial Regulation". Oxford University Press. Retrieved August 15, 2014.
- Weil, Jonathan (April 1, 2014). "Weil on Finance: FBI Hops on Michael Lewis Bandwagon". Bloomberg News. Retrieved April 1, 2014.
- Bradford, Harry (April 1, 2014). "FBI Investigating High-Frequency Traders: WSJ". Huffington Post. Retrieved April 1, 2014.
- "New York State AG Eric Schneiderman: Some high-frequency trading practices "may be illegal"". CBS This Morning. CBS News. March 31, 2014. Retrieved April 1, 2014.
- Rubenstein, Ari (April 30, 2014). "Thank you, Michael Lewis". CNBC. Retrieved May 1, 2014.
- Bartash, Jeffry (April 29, 2014). "U.S. markets 'not rigged,' SEC boss says, White downplays 'flash boy' charges in new Michael Lewis book". MarketWatch. Dow Jones. Retrieved May 1, 2014.
- "System isn't 'Rigged'-Bloomberg defends HFT". CNBC. CNBC.com. May 2, 2014. Retrieved June 16, 2014.
- Mamudi, JSam (April 1, 2014). 1, 2014 "Not Every High-Frequency Trader Is Predatory, Levitt Says". Bloomberg News.
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- "Michael Lewis on a Rigged Stock Market and the Heroes of Wall Street". Knowledge@Wharton (wharton.upenn.edu). Wharton School of Business. June 4, 2014.
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External links
- W.W. Norton, Flash Boys official site
- excerpt from the New York Times
- IEX website
- High Frequency Trading and the Risk Monitoring of Automated Trading (2013) Robert Fernandez
- Regulating Trading Practices (2014) Andreas M. Fleckner, The Oxford Handbook of Financial Regulation
- Recommendations for Equitable Allocation of Trades in High Frequency Trading Environments by John McPartland (Federal Reserve Bank of Chicago)
- How Do Broker-Dealers/Futures Commission Merchants Control the Risks of High Speed Trading? by Carol Clark and Rajeev Ranjan (Federal Reserve Bank of Chicago)
- How Do Clearing Organizations Control the Risks of High Speed Trading? by Carol Clark and John McPartland (Federal Reserve Bank of Chicago)
- How Do Proprietary Trading Firms Control the Risks of High Speed Trading? by Carol Clark and Rajeev Ranjan (Federal Reserve Bank of Chicago)
- How Do Exchanges Control the Risks of High Speed Trading? by Carol Clark and Rajeev Ranjan (Federal Reserve Bank of Chicago)
- What Tools Do Vendors Provide to Control the Risks of High Speed Trading? by Carol Clark, Richard Heckinger, John W. McPartland, and Rajeev Ranjan (Federal Reserve Bank of Chicago)
- "The great debate: Combating HFTs image", CNBC video (23:09)] with Brad Katsuyama (IEX), Michael Lewis, and William O'Brien (BATS), April 1, 2014
- Judy Woodruff (April 4, 2014). "In 'Flash Boys,' a story of Wall Street reform from within: Interview with Michael Lewis". Retrieved April 8, 2014.
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Works by Michael Lewis | |
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Books | |
Film adaptations |