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Michael Lewis’ Flash Boys – further comments and links


The publication of Michael Lewis’ book “Flash Boys” renewed the general interest in high frequency trading and fuelled the debate about its potential use or harm. After finishing my first compilation of comments and reviews of the book I came upon further interesting and challenging contributions which I would like to share with you.

Zerohedge presented a summary of High Frequency Trading: All You Need To Know writing

“In the aftermath of Michael Lewis’ book “Flash Boys” there has been a renewed surge in interest in High Frequency Trading. Alas, much of it is conflicted, biased, overly technical or simply wrong. And since we can’t assume that all those interested have been followed our 5 year of coverage of a topic that finally has earned its day in the public spotlight, below is a simple summary for everyone. …”

There was a very interesting debate on April 4 on Reuters Insider about Wealth Strategies: Are the markets better off with HFT? Reuters’ Rhonda Shaffler confronted Manoj Narang, founder and CEO of Tradeworx, and Haim Bodek, author of The Problem of HFT and founder of Decimus Capital Markets, with statements Michael Lewis had made in an earlier interview and asked for their comments:

The same day, Scott Locklin posted a highly critical review of Michael Lewis’ book: Michael Lewis: shilling for the buyside:

“Journalism, in the ideal world, is supposed to inform the citizenry of facts important to their well being. Modern journalism seems to involve issuing press releases from the oligarchical reptiles who are destroying Western Civilization. Maybe I am a naive fool, and it was always thus. Either way, Michael Lewis’s latest book lends credence to the view that he is a very modern journalist.

Lewis’s book purports to be about high frequency trading. He manages to write several hundred pages of gobbledeygook without actually speaking to a High Frequency Trader (unless you count his incongruous encounter with poor Sergey Aleynikov ). The story Lewis actually tells is one of incompetent sell side traders who started an exchange which serves the interests of wealthy buy siders and shady brokers. …”

The Streetwise Professor asked on April 5: Pinging: Who is the Predator, and Who Is the Prey? starting:

“The debate over Lewis’s Flash Boys is generating more informed commentary than the book itself. One thing that is emerging in the debate is the identity of the main contending parties: HFT vs. the Buy Side, mainly big institutional traders.

One of the criticisms of HFT is that it engages in various strategies to attempt to ferret out institutional order flows, which upsets the buy side. But the issue is not nearly so clearcut as the buy side would have you believe. …”

Many would consider the following two contributions as two extremes in this debate:

In a Wonkblog interview on April 4, Eric Scott Hunsader, a well-known critic of high frequency trading, welcomed Michael Lewis’ book. In his introduction to A veteran programmer explains how the stock market became “rigged”, Max Ehrenfreund who conducted the interview wrote:

“Lewis is not the first to cry foul on these strategies. Eric Scott Hunsader, the founder of Nanex, has made himself immensely unpopular in some circles for his outspoken and persistent criticism of HFT, which he first encountered during the “flash crash” of 2010. Bloomberg called him the “nemesis” and “scourge” of the HFT world.

I asked Hunsader to talk about the book, the new stock exchange, and his long career in financial technology. The conversation focused on the Securities and Exchange Commission ruling in 2007 that allowed what we now know as high-frequency trading. …”

The second example is the blog post by Matt Hurd (Meanderful) on Flash Boys – Misleading information, who wrote

“Flash Boys? I read the book last night. Appalling. I found it a well wide of the mark. It vilifies and accuses inaccurately. The pulsating vehemence of its message makes it a singly dangerous book.

I love Michael Lewis’ story telling. He really knows how to write a page turner for a geek like me.

Working in an investment bank in 90s, Liars Poker had a cult status with the currency note based serial number poker he made infamous being pervasive with many traders in Sydney too. Without Moneyball there wouldn’t have been a Soccernomics book to read. Soccernomics made watching football richer and, as a Liverpool fan, I’m especially liking soccer just now. So thank you Mr Lewis.

The Big Short. Terrific read. Hmm, but what happened to Paulson? A good story but not quite the full picture. No doubt about it though, Lewis writes books that many people find fun to read.

Nonetheless, Flash Boys is a stunningly dangerous piece of misinformation. The truth is quite a bit different to the words you’ll read beyond its red cover. … “

The question of data came up. As Ben Walsh (Reuters) asked in US stock ownership: Fact-checking Michael Lewis:

“Before the flash crash, 67 percent of U.S. households owned stocks; by the end of 2013, only 52 percent did: the fantastic post-crisis bull market was noteworthy for how many Americans elected not to participate in it.
–Michael Lewis, Flash Boys, pp 200-201

Is this true?”

On Politico, on April 5 Zachary Warmbrodt and Dave Clarke drew attention to The Michael Lewis factor:

“Talking heads on CNBC for days scoff that worries over high-speed trading are old news and overblown.

Reporters on the beat are defensive on Twitter.

And Attorney General Eric Holder is telling Congress not to worry — the Justice Department is already looking into high-speed traders.

Add it up: Michael Lewis has another hit on his hands. …”

One merit of the book is that, as the Streetwise Professor indicated, the debates around it offer so much information. John McCrank (Reuters) explained on April 6 why Dark Markets May Be A Bigger Threat To Investors Than High-Frequency Trading:

“Fears that high-speed traders have been rigging the U.S. stock market went mainstream last week thanks to allegations in a book by financial author Michael Lewis, but there may be a more serious threat to investors: the increasing amount of trading that happens outside of exchanges.

Some former regulators and academics say so much trading is now happening away from exchanges that publicly quoted prices for stocks on exchanges may no longer properly reflect where the market is. And this problem could cost investors far more money than any shenanigans related to high frequency trading. …”

In The mystery ending of Michael Lewis’ Flash Boys: FCC License No. 1215095 Ann Brocklehurst drew the attention to a special aspect:

“You’re here because you googled FCC license 1215095, right? Perhaps you’ve already discovered the registrant, Converge Towers LLC, and its corporate ties to Cantor Fitzgerald, a New York financial firm best known for the devastation it suffered in the 9/11 attacks.

Or maybe that information is incorrect. (See the comments.) In my work, I discover quite a lot of errors and outdated information in internet databases. I haven’t actually called the FCC to check so for now, I can’t actually confirm anything about 1215095.

I think I might, however, know the story — or at least part of the story — Michael Lewis hints at at the end of his fascinating new book, Flash Boys: A Wall Street Revolt.

That’s because a couple of months ago I wrote a post about how Vigilant Global — a Montreal-based HFT prop shop was building its own microwave networks.

I later learned this was something of a trend so I wasn’t surprised, but rather perplexed, by the final paragraph of Michael Lewis’ fascinating new book, Flash Boys, where he writes about a microwave tower he discovers in the wilds of Pennsylvania: …”

Finally, on April 7 Jérémie Cohen-Setton presented on Bruegel’s blog a Blogs review: High frequency trading – too linked to fail, too fast to save? which contains some of the texts you find in my two articles and many more.

And here is Michael Lewis himself once again in two Bloomberg videos. On April 2 Bloomberg’s Stephanie Ruhle looked back at a 30-year journey explaining how Michael Lewis became the most-read author on Wall Street:

and on April 7 Michael Lewis was talking about his wish to have Brad Pitt as ‘Flash Boys’ Star in the film:

Enjoy it!


From → Markets

  1. Barbara Bohr permalink

    Reblogged this on Die Vorbänker – Ethical Finance and commented:
    Da ich bisher selber noch keine Zeit hatte, Michael Lewis’ “Flash Boys” zu lesen, möchte ich gerne auf Beates Blogbeitrag verweisen. Er enthält eine gute Zusammenstellung der Reaktionen auf Lewis’ Buch und damit zum High Frequency Trading.

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