Flash Boys

I finished reading the book Flash Boys: A Wall Street Revolt by Michael Lewis this weekend. The book has generated a lot of publicity and attention since its release. It can be found here.


Here are a few noteworthy excerpts:

"The 1987 stock market crash set in motion a process - weak at first, stronger over the years - that has ended with computers entirely replacing the people."

"Someone out there was using the fact that stock market orders arrived at different times at different exchanges to front-run orders from one market to another."

"Reg NMS was intended to create equality of opportunity in the U.S. stock market. Instead it institutionalized a more pernicious inequility. A small class of insiders with the resources to create speed were now allowed to preview the market and trade on what they had seen."

"In a paper published in February 2013, a team of researchers at the University of California, Berkeley showed that the SIP price of Apple stock and the price seen by traders with faster channels of market information differed 55,000 times in a single day."

"Every systemic market injustice arose from some loophole in a regulation created to correct some prior injustice."

"RBC conducted a study, never released publicly, in which they found that more than 200 SEC staffers since 2007 had left their government jobs to work for high-frequency trading firms or the firms that lobbied Washington on their behalf. Some of these people had played central roles in deciding how, or even whether, to regulate high-frequency trading."

"In early 2013, one of the largest high-frequency traders, Virtu Financial, publicly boasted that in five and a half years of trading it had experienced just one day when it hadn't made money, and that the loss was caused by 'human error.' In 2008, Dave Cummings, the CEO of a high-frequency trading firm called Tradebot, told university students that his firm had gone four years without a single day of trading losses. This sort of performance is possible only if you have a huge informational advantage."

"A former employee of Citadel who also once had top secret security clearance at the Pentagon says, 'To get into the Pentagon and into my area, it took two badge swipes. One to get into the building and one to get into my area. Guess how many badge swipes it took me to get to my seat at Citadel? Five.'"

"The less you know about how they make the money, the better it is for them."

"The only Goldman Sachs employee arrested by the FBI in the aftermath of a financial crisis Goldman had done so much to fuel was the employee Goldman had asked the FBI to arrest."

"On the savannah, are the hyenas and the vultures the bad guys?"

"If high-frequency traders performed a valuable service in the financial markets, they should still do so, after their unfair advantages had been eliminated."

"'People think that complex is an advanced state of complicated,' said Zoran. 'It's not. A car key is simple. A car is complicated. A car in traffic is complex.'"

"Brad was not by nature a radical. He was simply in possession of radical truths."

"Technology had collided with Wall Street in a peculiar way. It had been used, as it should have been used, to increase efficiency. But it had also been used to introduce a peculiar sort of market inefficiency."


Overall, I would recommend giving this book a read.

-Joe