Michael Lewis’s flawed new book

By Felix Salmon
March 31, 2014

I’m halfway through the new Michael Lewis book – the one that has been turned into not only a breathless 60 Minutes segment but also a long excerpt in the New York Times Magazine. Like all Michael Lewis books, it’s written with great clarity and fluency: you’re not going to have any trouble turning the pages. And, like all Michael Lewis books, it’s at heart a narrative about a person — in this case, Brad Katsuyama, the founder of a small new stock exchange called IEX.

The narrative is interesting enough — but so far I haven’t seen anything that would qualify as the “lighting in a bottle” he promised Boris Kachka. We were promised scoops, but so far it’s hard to see what the scoops are supposed to be. The most interesting thing I’ve discovered so far is the existence of something called “latency tables” — a way for HFT shops to work out exactly which brokers were responsible for which orders. The trick is to realize that because every brokerage is in a slightly different physical location, each house’s trades will hit the various different stock exchanges in a slightly different order. And so by looking at the time difference between a given trade showing up on different exchanges, you can (or could, at one point) in theory identify the bank behind it.

This vagueness about time is one of the weaknesses of the book: it’s hard to keep track of time, and a lot of it seems to be an exposĂ© not of high-frequency trading as it exists today, but rather of high-frequency trading as it existed during its brief heyday circa 2008. Lewis takes pains to tell us what happened to the number of trades per day between 2006 and 2009, for instance, but doesn’t feel the need to mention what has happened since then. (It is falling, quite dramatically.) The scale of the HFT problem — and the amount of money being made by the HFT industry — is in sharp decline: there was big money to be made once upon a time, but nowadays it’s not really there anymore. Because that fact doesn’t fit Lewis’s narrative, however, I doubt I’m going to find it anywhere in his book.

Similarly, Lewis goes to great lengths to elide the distinction between small investors and big investors. As a rule, small investors are helped by HFT: they get filled immediately, at NBBO. (NBBO is National Best Bid/Offer: basically, the very best price in the market.) It’s big investors who get hurt by HFT: because they need more stock than is immediately available, the algobots can try to front-run their trades. But Lewis plays the “all investors are small investors” card: if a hedge fund is running money on behalf of a pension fund, and the pension fund is looking after the money of middle-class individuals, then, mutatis mutandis, the hedge fund is basically just the little guy. Which is how David Einhorn ended up appearing on 60 Minutes playing the part of the put-upon small investor. Ha!

Lewis is also cavalier in his declaration that intermediation has never been as profitable as it is today, in the hands of HFT shops. He does say that the entire history of Wall Street is one of scandals, “linked together trunk to tail like circus elephants”, and nearly always involving front-running of some description. And he also mentions that while you used to be able to drive a truck through the bid-offer prices on stocks, pre-decimalization, nowadays prices are much, much tighter — with the result that trading is much, much less expensive than it used to be. Given all that, it stands to reason that even if the HFT shops are making good money, they’re still making less than the big broker-dealers used to make back in the day. But that’s not a calculation Lewis seems to have any interest in.

In his introduction to the book, Lewis writes this:

The average investor has no hope of knowing, of course, even the little he needs to know. He logs onto his TD Ameritrade or E*Trade or Schwab account, enters a ticker symbol of some stock, and clicks an icon that says “Buy”: Then what? He may think he knows what happens after he presses the key on his computer keyboard, but, trust me, he does not. If he did, he’d think twice before he pressed it.

This is silly. I’ll tell you what happens when the little guy presses that key: his order doesn’t go anywhere near any stock exchange, and no HFT shop is going to front-run it. Instead, he will receive exactly the number of shares he ordered, at exactly the best price in the market at the second he pressed the button, and he will do so in less time than it takes his web browser to refresh. Buying a small number of shares through an online brokerage account is the best guarantee of not getting front-run by HFT types. And there’s no reason whatsoever for the little guy to think twice before pressing the button.

HFT is dangerous, I’d like to see less of it, and I hope that Michael Lewis will help to bring it to wider attention. But my tentative verdict on Flash Boys (I’ll write something longer once I’ve finished the book) is that it actually misses the big problem with HFT, in the service of pushing a false narrative that it’s bad for the little guy.

50 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

Felix writes: “It’s big investors who get hurt by HFT: because they need more stock than is immediately available, the algobots can try to front-run their trades.”

But why are those “big investors” NOT complaining?

Why, for instance, has Vanguard repeatedly stated that it approves/welcomes hft? Is Gus Sauter deluded by his own firm’s indepth investigation of hft?

http://www.forbes.com/sites/alexandrazen drian/2010/09/23/vanguards-gus-sauter-th anks-high-frequency-traders/

Posted by dedalus | Report as abusive

If Kid Dynamite says that HFT do both harm and good but on net provide a benefit to the little guy I’m inclined to believe him.

I’m a small fish to be sure but the very few times I’ve felt screwed by our system was when I was buying something small and thinly traded. I was looking at an order book that had not changed in an hour. 500 shares offered at like 1.25 another 500 at 1.27, another 1000 at 1.30 and so on… plenty of stock to fill my 2,000 share order. Like an idiot I put in a market order and I get the first 500 at 1.25 as advertized and the other 1,500 shares in my market order go off at like 1.35. I ask Scottrade what happened to all the shares offered at .27 and .30 and the answer is they got pulled as soon as the first 500 shares traded.

Now if memory serves me I sold the stock I paid 1.35 for for like 10bucks within 2 years so who cares about the small change… the only thing that scared me about the whole incident is that someone was so efficient with the hardware and the software that taking literally a couple bucks of my hands on some dog stock that traded less than 10,000 shares a day was actually worth their time.

I’d be fine with a penny a share tax on exchange listed securities. Lots of smart people absolutely that idea though so I might be wrong. At the very least we should limit the ability to cancel an executed order once it’s been placed… what good is liquidity after all if it can dry up in a second.

Posted by y2kurtus | Report as abusive

‘Lewis takes pains to tell us what happened to the number of trades per day between 2006 and 2009, for instance, but doesn’t feel the need to mention what has happened since then. (It is falling, quite dramatically.)’….
Felix link doesn’t prove this at all. In fact it disproves what he says. The Exhibit 7 chart shows a red part of the graph HFT (Less EFT’s). Any person would be hard pressed to see any decline, let alone one that is ‘falling, quite dramatically’…
Second: this from his narative… ‘Nowadays, however, the message is sinking in: it’s a rigged game, you can’t win, and you’re better off with a passive strategy.’
Seems to me to say the very thing Lewis’s book says….

Posted by edgyinchina | Report as abusive

Good lord. What’s with all this cozying up to HFTs? They skim billions of dollars from investors, and that’s worth the phantom liquidity that they provide? Why defend them? And give the reading public a bit of credit for SOME intelligence. It is rather obvious that the harm to any individual investor is negligible. Lewis never disputes this. The harm is more to the market itself. Which Lewis does talk about. Instability, flash crashes, and general distrust of an opaque market. The book is great. He points people to other, more detailed books if you want to dive in further in the footnotes.

Posted by Cosmacelf | Report as abusive

The link that purports to show that HFT is declining precipitously shows nothing of the sort. According to “Exhibit 7″, the decrease in overall equity volume in recent post-crash years is due almost exclusively to the decrease in “real money” trading. HFT volume (in red) for 2012 is approximately as big as it ever has been, such that HFT makes up a much, much greater proportion of trading volume than it did in ’06-’09. The link also suggests that “nowadays…the message is sinking in: [the stock market] is a rigged game, you can’t win, and you’re better off with a passive strategy.” The November 2012 Felix apparently felt that the little guy really ought to think twice before pressing buttons on his online brokerage account.

Posted by BartFargo | Report as abusive

I haven’t had the chance to read it yet Felix but as of about 6:00 AM this morning Flash Boys is #1 on Amazon’s best seller list. It’s nice to see that people are at the least paying a little attention.

Posted by Missinginaction | Report as abusive

Being risk averse, I knew that my small-guy trading was going to do a number on my psyche. The whole gameplan of “buy and hold” was nearly impossible to accomplish, as I kept popping onto the site to watch as my one stock of this underperformed and my two stocks of that hit the skids, but I suppose someone with greater intestinal fortitude could handle that. That is part of the problem however. I think those most likely to play the two-stock game are also most likely to use these services, whereas someone with the finances and who view risk as challenge versus loss will probably be much deeper in the investment cycle. In other words, the little guy is most prone to using these services, and the reticence keeps him from going for the throat. It’s not as much about the service as the individual psyche of the person utilizing it.

Posted by DwDunphy | Report as abusive

y2kurtus: “At the very least we should limit the ability to cancel an executed order once it’s been placed… what good is liquidity after all if it can dry up in a second.”

Katsuyama found in experiments funded by RBC that the orders were not being cancelled. HF traders were jumping in and buying the offers first, then selling the back at a higher price. He and colleagues at RBC developed a system called Thor that sometimes managed to cause all parts of an order to arrive at each exchange at exactly the same millisecond. Then, the liquidity was still there. A guy at HF trader Citadel called and said “I know what you’re doing. It’s genius. And there’s nothing we can do about it. But you are only two percent of the market.” (Flash Boys, p. 103).

“I ask Scottrade what happened to all the shares offered at .27 and .30 and the answer is they got pulled as soon as the first 500 shares traded.” Probably what really happened (and Scottrade would have no way of knowing) was the HF traders bought the shares at 1.27 and 1.30 (on different exchanges than the shares at 1.25, before your order even arrived at those exchanges) and sold them to you at 1.35.

[Sorry if this is a duplicate post.]

Posted by efhuff | Report as abusive

@Felix Salmon: You are very wrong. Michael Lewis’s 60 minutes interview about this book is what literally opened my eyes on this fraud. I am a total capitalist when ity comes to money and fully believe in highest possible reward for innovative technology.BUT front-running as described and practice here is not innovation but rather actual data theft leading to price gouging. I do the research, I take the decision and the risk to buy a stock – but these HFT guys steal my decision and buy that stock in front of me AFTER looking at my order and then sell it to me at a higher price! That IS stealing and that is what Michael Llewis’s book brought to light.

Posted by Jito | Report as abusive

A lot of smart people (investors, regulators, journalists, etc…) have looked at, are looking at, and will look at the effect of the HFTs on the industry.
Proper business models, implemented correctly are beneficial to the investment community, irrespective of the size of the investment.
Right now, it is a book we are talking about, books need to sell, they need some controversy.
At the end of the day – no pun intended – the main characters of the book are not very well known for their contribution to algorithmic trading.

Posted by Liger | Report as abusive

What no one mentions is that 60 minutes did a big HFT segment on june 5, 2011 in which the assertion of “rigging” is front and center.

Posted by midasw | Report as abusive

HFT affects everyone that is involved in the market especially the little guy. Think about the “main street” consumers that are invested in managed accounts (Pension Plans, mutual funds etc). While I agree, HFT are keeping the bid and ask very close on individual stocks and do increase volume drastically the flip side is that HFT front running is costing large managed funds large sums of money through hidden costs due to their behavior. If a large pension fund or mutual fund is being front run by HFT and effectively charged more for 10′s of thousands of shares of stock the fund is trying to buy, this will and does effect the fund’s return rate in the long term. These costs are skimming off returns that should be in the investors pockets. HFTs are creating another invisible fee for large funds that no one can see.
Also, volume and liquidity are two different entities in markets. Volume implies gross shares bought and sold. Liquidity implies gross shares bought and sold with many different buyers creating a vast diverse “deep” market that is stable. Volume and liquidity can be mutually exclusive. If the HFTs are contributing to to vast volumes in the market, they are creating the appearance of vast liquidity. What happens when these few HFT players that are contributing the most volume to the markets pull back one day and stop their buying and selling? Liquidity disappears in a matter of seconds. AKA the setup for another “flash crash”.

Posted by grosby | Report as abusive

Another paid option piece, Reuters? HFT bring absolutely nothing of value to exchanges. If anything, the create the illusion of liquidity where there is none. Ban them.

Posted by BidnisMan | Report as abusive

edit, spelling: opinion not option.

Posted by BidnisMan | Report as abusive

“Given all that, it stands to reason that even if the HFT shops are making good money, they’re still making less than the big broker-dealers used to make back in the day. But that’s not a calculation Lewis seems to have any interest in.”

Is it a calculation you’re interested in? It seems a little weak to say, hey he didn’t do the math, and then not do the math. Surely the huge increase in trading volume since decimalization has more than made up for the the changes in commissions.

Posted by Moopheus | Report as abusive

Really Felix? How can you defend this and still sleep at night? Have you no ethics at all? Or just Bankster ethics.

Posted by tmc | Report as abusive

Another GRREAT piece by a techie on this at Ted Talks:
http://www.ted.com/talks/kevin_slavin_ho w_algorithms_shape_our_world

Note that it is so profitable they are/have put in a direct fiber optic connection to Chicago.
And Felix says “there was big money to be made once upon a time, but nowadays it’s not really there anymore.” If that were true why are they continuing to invest in it. I hope you were paid a lot for this article Felix because you just lost all credibility.

Posted by tmc | Report as abusive

What an astonishing piece! Does the guy who wrote this have any idea how much he sounds like Louis XVI or some other clueless, pompous aristocrat. “Hey, rich guys are expected to score big and trick the masses. That’s the way the world works.” Time to start collecting those torches and pitchforks, my friends. These aristocrats need some help with reality.

Posted by RedBear3 | Report as abusive

I don’t think the markets do enough to level their own playing fields. These are not really transparent and free markets. In this digital age, we could all have equal access without middle-men or special trading privileges for some. But the system is bloated and built on middle-men.

We’ve already seen that intermediaries placing 200,000 flips per second crashes the market. Yet the markets don’t do anything to stop it. They easily could.

Posted by AlkalineState | Report as abusive

I agree with your assessment. After watching the 60 minutes segment I turned to my wife and said, “this is old news, if there is a current problem, we’ll see it in the market tomorrow”. Guess what, DJ +134. Still, the story pointed out to me that the little guy really is at a disadvantage if for no other reason than that he simply doesn’t have the same connections as the big players. I don’t think that will ever change.

Posted by Like2Bike | Report as abusive

I agree, Felix. With both sides of your coin here: HFTs are problems, but Lewis’ book never really gets at why.

One small point about the book. Lewis overstates the importance of Reg NMS as THE catalyst for the rise of HFT. One might at least as plausibly finger the decimalization of the U.S. stock markets years before.
But Lewis’ time-line benefits by relating HFT tightly to NMS. Why? Because NMS, though written in 2005, came into force in 2007, and Goldman Sachs hired Aleynikov in, you guessed it, 2007.

Lewis has an important role for Aleynikov to play, as the self-blinkered draft horse for the bad guys. The pieces fit neatly for the drama.

But historical fiction is still … fiction.

Posted by Christofurio | Report as abusive

Felix is being too clever by half. If you or I had inside information about a pension fund’s plans to trade and exploited it to make millions we could go to jail.

Posted by Fitc | Report as abusive

I’ve read a lot of articles for and against HFT but I’ve still yet to read a single article that explains the mechanics of how they work. These questions may be stupid but there are some brilliant commenters here so I’ll ask anyway:

Most of the anti-HFT literature I’ve read alludes to the idea that these algorithms can read quotes at near light speed. They can then use that data to match a buy order with a sell order, step in between the two parties, and profit on the spread. The pro-HFT literature I’ve read usually argues on behalf of a different concept altogether.

Can someone explain to me if this is, in fact, how HFTs work? Do they ever actually take securities into inventory? Can they actually front run executions based on stepping in front of bid/offer quotes? If the latter is true, then a follow-up question is how is that considered liquidity if the intermediation only occurs when a match can be made?

Posted by spectre855 | Report as abusive

I stopped reading at the part where you said you were HALFWAY through the book. Let us know when you can offer a fully informed opinion.

Posted by Whiskey1027 | Report as abusive

As an individual investor, my question is whether or not HFT distorts stock prices.

After all, algorithms programmed to profit from microsecond trades really don’t give a crap about whether the stock they are trading is fairly valued, or that company’s future outlook is. Yet real humans make their investing decisions precisely based on those factors.

So the real question to me is whether or not the fact that 50-60% or all trading volume cares nothing about the real world outlook for the stocks/companies they are trading distorts prices?

Posted by mfw13 | Report as abusive

I think we need to go back to ticker tape, calls to your broker, and huge commissions. That would be so much easier and favorable to this $9.99 commission and $0.01 spread BULL$h1t we have to put up with now.

Posted by Vger67 | Report as abusive

It’s just too shady for open markets. Paying for market access to Divide trading seconds into millionths and shoot a bunch of trades in below radar detection…. is an inherently bad idea for open markets.

Just as the markets set operating hours (banker hours), they should also set some common sense trade frequencies. The orders can be as large as you want, but only one order per second per trader. If that is too restrictive, then you’re not really talking about a market any more.

Posted by AlkalineState | Report as abusive

Mr. Salmon:
Please excuse my blunt analysis of your ‘story’:
“you don;t know enough to know you don;t know enough,” even if you read Mr. Lewis;s entire book.

Sorry about that — NOT!

regards,sob

Posted by Anonymous | Report as abusive

This is all akin to rearranging the deckchairs on the Titanic. The real crime, and fraud, that’s being committed, is being done by the private Federal Reserve Bankers. They are printing cash by the trainloads, and they now own more than 1/3 of the entire US Bond market. hahaha. Good luck unwinding that Janet!

If you haven’t already bailed out of their fake, paper-based fiat ponzi-scheme by now, there’s absolutely no hope for you. See you in the funny papers.

Posted by CF137 | Report as abusive

Hi Felix. Regardless of Lewis’ book, have you actually experienced trading real money on live on market?
I ask this question because if you did, you will not be writing this article, or unless you are being paid by “someone” to do so.

Posted by marbnadal | Report as abusive

Surprised to discover after all this time that Felix has difficulty with the concept of front running. I can only conclude as such since he seems to be oblivious of the day to day reality of trading and how it has changed since HFT has become ubiquitous.

Probably because he writes about the market, but does not participate in the market. If he traded he would see for himself what Lewis et. al. are talking about. You can’t miss it.

Posted by eleno | Report as abusive

Felix,

I think the point is more nuanced than you have presented it.

The activities to which Mr. Lewis objects are the outright front-running by HFT and the shady dealings of the exchanges.

1) The method of computerized trading to which Mr. Lewis objects is one where set of individuals receives information about your order before that information hits the NBBO. Basically, the order is read by the HFTs AT THE LOCAL EXCHANGE. Then, the HFTs beat your order TO THE CONSOLIDATE TAPE. The HFTs go into the other markets and pick up available bids/offers on NBBO before your order has the opportunity to do so. Your order was first chronologically, but it wasn’t the first to hit the other exchanges due to the HFT speed advantage. This is fairly transparent front-running.

Exchanges should be routing all of their orders in a single, consolidated fashion to the NBBO tape. Allowing them to come out disjointed allows the faster players to use the information you have given the exchange (your buy/sell order) against your own interests. Batch auctions are also an interesting solution.

A HFT program scooping up bids/offers in front of your trade (which was chronologically first) DOES NOT ADD LIQUIDITY.

2) A HFT should not be allowed to get your order data BEFORE it hits the NBBO. It can only do so because the EXCHANGE IS SELLING YOUR DATA. I do not think you can have a fair marketplace where exchanges are selling your transaction data to preferred players who can use it against you. This was an important reason behind the development of dark pools. The rules aren’t transparent and certain players are preferred. This is only becoming widely aware to the public as a result of Mr. Lewis’ book. If the exchanges were so game for transparency, why hasn’t this come out earlier? Why weren’t the rules more clearly explained?

Posted by RichardS1234 | Report as abusive

Dean Baker published a list of backers of a Financial Transaction Tax, pennies per trade, which would generate lots of revenue, curtail high volume trading, and have minimal effect on small traders. http://preview.tinyurl.com/23btl6m

Posted by MartyNH | Report as abusive

I just love the argument: “Well the broker/dealers & investment banks used to skim/steal way more when spreads where denominated in eighths”. Stealing is stealing, the magnitude shouldn’t matter. This is pure and simple front-running to skim small fraction of every large order with zero value-added to the market as a whole. Shame on everyone who says it’s ok because in the “old days” they used to steal even more.

Posted by YolkyPalky | Report as abusive

“Given all that, it stands to reason that even if the HFT shops are making good money, they’re still making less than the big broker-dealers used to make back in the day.”

Hmmm. Felix, this is the sort of question on which one might prefer a wee bit of evidence to what “stands to reason,” your reason.

-dlj.

Posted by DavidLloydJones | Report as abusive

Here’s the problem: we have financial journalists and so-called experts on CNBC and elsewhere making sweeping and definitive statements and opinions about a complex issue of the market that they have NO idea of how it works. Mr Salmon should be ashamed of himself for writing this article after reading only half of the book and siding with HFT while knowing absolutely nothing about the process. There are allegations from credible people that there is a problem, which should be enough to investigate. Let’s save our definitive conclusions until after that investigation takes place.

Posted by mclynn | Report as abusive

The problem with a complex topic like this is even after Felix has read the book he still doesn’t understand it! And he supposedly works in the industry for Reuters! The latency tables are not used to reveal the brokers it’s to identify the exchanges where the orders might be sent next and to trade ahead of those orders!

Plus how does Felix really know he got filled at the NBBO? Does all his trades come with a time stamp of precisely when it was filled at the microsecond level along with a snapshot of what the NBBO was at the time? I think if he had this data he would be a bit shocked. In fact all his retail order flow will never actually hit an exchange at all!

Posted by Blave_2000 | Report as abusive

@RichardS1234: Thank you, I was hoping someone would address my question. Your version is what I keep reading in all of the anti-HFT arguments. The defensive articles often address different trading strategies altogether. If what you’re saying is indeed possible, then I have a hard time seeing how it’s beneficial to the market (though that doesn’t mean it’s not).

Posted by spectre855 | Report as abusive

Felix, just finished the book. I think it’s pretty clear that all the “news” is in the final third, so I’m eagerly awaiting awaiting your follow up when you finish. Not sure your initial, qualified analysis holds up in the end. Pretty fascinating that single traders could get front run and also the two charts showing the perception of the market to a computer.

Posted by JuvenalRedd | Report as abusive

For example, I think the book destroys this paragraph, which I initially agreed with:

“I’ll tell you what happens when the little guy presses that key: his order doesn’t go anywhere near any stock exchange, and no HFT shop is going to front-run it. Instead, he will receive exactly the number of shares he ordered, at exactly the best price in the market at the second he pressed the button, and he will do so in less time than it takes his web browser to refresh. Buying a small number of shares through an online brokerage account is the best guarantee of not getting front-run by HFT types. And there’s no reason whatsoever for the little guy to think twice before pressing the button.”

When you think about how computers see the market and the fact that 100 bid/offers are the bait, anybody trading larger personal blocks than that are at risk.

Posted by JuvenalRedd | Report as abusive

Yea, Felix, OBrien just called and we need a piece defending HFT, just make up some shxt that it really benefits the markets, wanta big black eye smear of Lewis and the book, got it. Okay.

Posted by j8h9 | Report as abusive

Bring the Robin Hood Tax to the table and then the costs of split second trading will negate the benefits and reduce (maybe eliminate) the problem.

Posted by euro-yank | Report as abusive

This article might be misinformed because Felix Salmon did not care to read the book. All he found interesting was the “latency tables” which are in the first part of the book.

But instead of informing himself more and read the book he writes another article on Slate on the rest of the book defending Virtu, the HFT Trader that had to postpone the IPO because of the book.

Not Solomon thinks the book is about Vertu (although he admits that Lewis never writes about it) and finds this unfair. And the few cents the retail investors might loose on the trades would not matter, therefore there was no victim.

This is either very sloppy journalism or outright corrupted (Reuters actually makes a lot of money from market data, so this might explain it).

The small investor is also a victim because he trades at prices that are older than the ones the hft traders (and most institional investors which most of the time invest pension fund money) see.

What Lewis critizes most ist the flawed incentives, that brokers sell their order flow to hft firms so they can profit from these slow orders instead of ensuring that their orders get executed at a fair price. That the big banks created dark pools and let the orders of big clients there for some time instead of ordering it to the exchanges with the best prices because they can keep more of the fees if it is traded in the dark pools and because the HFT Traders pay to get fast access to these pools so they can skim a few cents off every order there if the market moves in the right direction.

Felix Salmon, please read the book before you write the next article about it. This book will be so widely read that your articles make you look very stupid or corrupt if people read it after reading the book!

Posted by aloisk | Report as abusive

Disclosure: I have not yet read Mr. Lewis’ book.

Like many of you here, I was immediately alarmed at the allegations brought by Mr. Lewis. If you haven’t watched it yet, the discussion on CNBC between Katsuyama and O’Brien, a debate which actually stopped trading at the NYSE (http://www.cnbc.com/id/101544772), is fascinating. I definitely sided with Lewis and Katsuyama against high-frequency trading during the 20 minute discussion. (It didn’t help that O’Brien was very argumentative and did not come across as being friendly.)

However, I recently watched some videos by Tom Sosnoff of tastytrade and the founder of thinkorswim that changed my mind. Mr. Sosnoff is a strong advocate of individuals taking control of their own investing. He feels that Mr. Lewis is doing a huge disservice and may possibly be setting back the financial industry in the United States.

To see what Sosnoff feels about how high-frequency trading and the retail investor, watch the videos here: http://www.twoinvesting.com/2014/04/high -frequency-trading-and-the-retail-invest or/

In fact, after listening to Sosnoff’s arguments, I may no longer be supporting Mr. Lewis by buying his book!

Posted by twoinvesting | Report as abusive

READ THIS BOOK A+. HFT firms steal your money. More so if it’s in a mutual fund, because “it’s really bad for big investors” from another of Felix’s bogus articles. He hasn’t even finished the book. The IEX exchange creators are Gods. Every investor should sent them $10. All of them could have made more money, without taking a big risk, by just selling out to the HFTs. But some people have integrity. On Wall St., it can get a little scarce. I’ve been there, I’m for sale. Just nothing too sleazy please. I’d only steal a little, and I wouldn’t kill anyone.

HFT is stealing. Stealing other peoples money is wrong. It is simply legal front running period.

Someone above asks how HFT systems work, he’s never read how. Me neither until I read Lewis’s book. He explains it very clearly. They put out small amounts of bids and offers for many stocks, sometimes at prices that will surely get hit, then they’ll front run you on another exchange by say pulling their bid back, and replacing it with a lower one. A millisecond ahead of the guy wanting to sell his shares, and he’ll never know for sure. There are other strategies explained. Simple to understand, once you’re told what they are. The SEC seems to be in bed with these guys. “Sleazy Exchange Commission”

Felix says in another article “it’s very bad for big investors, great for individuals”. What about big mutual funds where individuals have vast amounts of hard earned money under management.. They trade huge blocks, which are just an aggregation of individual investors.

Oh, and they could literally throw the country into a recession.b they’ve caused, “flash crashes”, which have luckily recovered before the market closes, and we’re very short. But suppose the market gapped down a few thousand points and closed tht way. Felix says Asia would follow down and billions of wealth lost. But US investor stock confidence could take a monster hit, and brokers would arrive in there offices in the morning deluged with sell orders. All because of some very difficult to pinpoint goofy interactions by HFT firms/programs, that were only there in the first place to steal money.

My best friend worked directly for Ken Griffin at Citadel (HFT has at times been their biggest moneymaker). So Ken Griffin big hedge fund makes huge sums for its investors by stealing your money. Go Ken, you sleazeball! A couple details, and my buddy could be identified, so no details. But he felt more strongly about HFT than I did right after finishing Lewis’s book. He could have written it, and it would read very similarly. “All it is legal front running to steal money”. And “they’ll talk about bid/offer spreads of a fraction of a cent, and the liquidity that provides the market, but since the prices are bogus, so is the spread.” Felix would say that they can still steal some of your money, but you’ll still be better off when the bid offer spreads were huge. HFT firms do provide programming jobs… Encouraging higher education…for Russians LOL So Wall Street Banks create their own, “Dark Pools”, to protect their customers, but really so THEY can screw the customer instead of the HFTs. They’ll let their prop traders front run the customers AND then sell access to select HFT firms. SLEAZY. “To provide Liquidity” they would say. And the customer won’t know what happened in the dark. SERIOUSLY. Oh, brokers ORDERED by their customers to use IEX (WHO THWARTED HFTs by spooling up their Fibre Optic cable, to create an artificial delay within their infrastructure.) wouldn’t do it. But since it’s a huge investment bank the customer has a “relationship” (yes, a carnal relationship, but only one side is getting screwed). They can’t really say, “you’re fired”. There bosses wouldn’t let them.

Posted by Glenn2000 | Report as abusive

THE BOOK IS GREAT. MY Best friend worked for Ken Griffin at Citadel, hasn’t read the book, but was practically quoting verbatim many of Lewis’s points. “It’s simply legal front running”. And the liquidity argument, with miniscule bid/offer spreads now, is only true if the prices are real”.

HFTs simply beat your orders into the now numerous exchanges, but activity learned elsewhere, and steal your money by front running you. Just a high tech way of the oldest investment scam known. Now Felix might say, it they only steal a little, your still better off than the old days. Hmmm…

So the big Investment Banks get an excuse to “protect there customers” by channelling their trades into “dark pools”. Then they can front run you themselves with their prop desks! And only sell access to their exchange to only a few HFT firms.

Stealing money is wrong.

Posted by Glenn2000 | Report as abusive

The iPhone was missing a significant video camera and its particular the processor is lower versus the additional cell phones, however ?t had been successful! Why does you consider iPad’s going to reduce? . -= sebin’s continue website… Crank up your own apple ipad tablet with the Apps! =-.

I and my guys ended up reading the excellent helpful tips located on your web site and then at once got a terrible suspicion I had not expressed respect to the blog owner for them. All the men appeared to be for that reason stimulated to learn them and now have really been enjoying them. Many thanks for indeed being indeed accommodating and then for settling on this kind of helpful guides most people are really eager to discover. My sincere apologies for not expressing gratitude to earlier.

In 2006, Amanda began to serve as the executive director of her local NAMI (National Alliance on Mental Illness) affiliate and in 2007, she founded Florida Borderline Personality Disorder Association 501(c)(3) organization dedicated to BPD education and awareness.

I began to adhere to your blog post