‘Flash Boys: A Wall Street Revolt’9/10/2014
Courtesy of Beaverdale Books
Review by Harriet Leitch
W. W. Norton & Company
March 31, 2014
Michael Lewis has taken a highly complex and detailed subject, high frequency trading on Wall Street, and wrote a compelling and disturbing account of the development of the stock markets of today. Scandals have accompanied Wall Street ever since it was created and regulations have been developed of necessity every time to combat the nefarious ways of “bad” traders. Seemingly with every new regulation, loopholes are discovered and exploited. The advent of the computer has not increased the ability of the Securities and Exchange Commission to stand guard for the small investor. Quite to the contrary, technology often surges ahead making current tracking and enforcement efforts ineffective.
Mr. Lewis introduces us to a Canadian-Japanese trader, Brad Katsuyama, whose curiosity about suddenly disappearing market prices on his computer screen leads him on a fascinating search for what is the cause of this problem. He surrounds himself with tech people and engineers, who similarly have a conscience about providing fairness on the market. What they discover is that High Frequency Trading (HFT) uses microseconds (millionths of a second) to buy and sell ahead of normal transactions, in effect using the relative slowness of normal transactions to make their money. These tactics end up earning billions for big banks, even at their own customers’ expense.
You will read this book with equal amounts fascination and outrage. The ability of the “big guys” and their systems to outrun the regulators is appallingly evident. But we do have better insight of what is going on due to “Flash Boys.” CV
Harriet Leitch retired to enjoy her grandchildren, garden, dogs, flute and to return to her love of books.