Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market Kindle Edition

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Scott Patterson (Author)
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Scott Patterson (Author)
4.4 out of 5 stars 184 customer reviews
ISBN-13: 978-0307887184
ISBN-10: 0307887189
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Product Details

  • File Size: 4838 KB
  • Print Length: 370 pages
  • Publisher: Crown Business; Reprint edition (June 12, 2012)
  • Publication Date: June 12, 2012
  • Language: English
  • ASIN: B006OFHLG6
  • Text-to-Speech: Enabled
  • X-Ray:
  • Word Wise: Enabled
  • Lending: Not Enabled
  • Enhanced Typesetting: Enabled
  • Amazon Best Sellers Rank: #90,298 Paid in Kindle Store (See Top 100 Paid in Kindle Store)

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Customer Reviews

Most Helpful Customer Reviews

5.0 out of 5 starsbetter than the other HFT books
By Daniel on June 15, 2012
Format: Hardcover Verified Purchase
This book does 2 things:
(1) goes through the historical events that led to our modern stock market and
(2) tries to explain what is going on in market microstructure.

The book does very well on (1) -- it's really an enjoyable book to read. But on (2) there's almost no information, no analytic discussion about microstructure, and some of the comparisons and conclusions are simply wrong. For example, the Patterson compares the immediate liquidity with the days of the past comparing the top of the book orders and noticing that today you have fewer orders at the top of the book. But this is misleading. In the past when the spread was at least 25 cents (due to regulation, ie, in increments on 1/8ths, but also in part of the gentleman's agreement between specialists to keep the spreads large) and now the spread is mostly 1 cent for most stocks. To compare apples to apples you need to sum up the liquidity on 25 levels in the current market, because basically these 25 levels would have been aggregated into 1 level in the past. Once you do this comparison, it's clear that the order book today has much more immediate liquidity.

In spite of the title, another thing that's missing in the book is a discussion of dark pools. Obviously, there's a much bigger problem with dark pools today than with the lit market, mainly because the dark pools can legally do prop trading (and they do) on the flow they see, but in the same time they are marketing a hidden market. This is simply wrong and should have been discussed.

The author points out that the market is unfair, in the sense knowledge of market micro-structure gives some players an advantage. But the market was never fair.Read more ›
7 Comments 124 of 136 people found this helpful. Was this review helpful to you? Yes No Sending feedback...
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5.0 out of 5 starsMust Read
By Brad Katsuyama on June 12, 2012
Format: Hardcover
As an insider in the world of electronic trading, I thought Scott Patterson did a great job in turning a highly complex subject into an easy-to-read and compelling narrative. As investor confidence continues to wane, it will further fuel the already heated discussion on the fairness of the market for every day investors. He didn't hit all the major conflicts that are present in the electronic trading industry, but those will hopefully make for a good sequel to his book. After reading thousands of pieces on the topic of market structure, this book stands out among the very best. Most literature on the subject falls into the trap of being too academic (and falling short of explaining the true nuances of market structure) or too biased (from both the HFT and anti-HFT camps).

In anticipation of those who will be critical of the author for missing some key pieces of information or misrepresenting a particular subject, readers need to realize that this is an industry that is shrouded in intense secrecy. Those who have intimate knowledge of this subject are rarely willing to talk about it, and many firms go to great lengths to protect their secrets and immense profits. As a "non-insider," it is impressive how the author was able to link together pieces of the puzzle, and thorough research was evident in his writings.

To take a quote from the author's previous book, The Quants: "The market was like a coin with a small flaw that makes it slightly more likely to come up heads than tails (or tails than heads). Out of a hundred flips, it was likely to come up heads fifty-two times, rather than fifty. The key to success was discovering those hidden flaws, as many as possible.Read more ›
3 Comments 149 of 169 people found this helpful. Was this review helpful to you? Yes No Sending feedback...
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3.0 out of 5 starsTwo Separate Books
By JoshK on June 27, 2012
Format: Kindle Edition Verified Purchase
This is really two separate books in one. The first is a bit hyperbollic, silly, and scare mongering account of the dangers of high frequency trading. The second book is a fantastic and engaging account of the evolution on the US equity trading marketplace.

Just some examples of #1:
At one point the author claims that HFT has lead to the lack of liquidity in smaller cap stocks including the slowdown of IPOs.
He quotes a consultant saying that a financial instituion will loose billions because of a loop in HFT code.
The reader is repeatedly scared of a looming and undefined "catastrophy" becase of HFT.
The improvements in spreads and liquidity is relatively ignored. Just go back and look at some old TAQ data to see how bad the markets used to be.
The author tries to paint a picture of one large order in the marketplace that is getting ripped off by HFT. The reality is much more complex with many orders of all sizes and time frames working throughout the day.

But, despite the silliness above, this is the best account of the evolution of the US market that I have seen. I'm sure many of the people considering buying this book have looked at ITCH and OUCH specs. But in the book I leared that it was all one guy, the original Island developer who developed them. And he named them ITCH and OUCH just to poke fun at NASDAQ's naming conventions.

There are so many more, great, stories that most readers will still enjoy the book. Take the history and the personalities and ignore the analysis.
22 Comments 80 of 101 people found this helpful. Was this review helpful to you? Yes No Sending feedback...
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Most Recent Customer Reviews

5.0 out of 5 starsGood read and historical context.

A bit biased, but well written and gives great historical context. I enjoyed it very much and easy read.

Published 1 day ago by Clifford Friedman
4.0 out of 5 stars"Dark Pools" is required reading for anyone who wants to ...

"Dark Pools" is required reading for anyone who wants to understand how the stock market now operates. Read more

Published 12 days ago by Jerry Crane
5.0 out of 5 starsAn Amazing and Very Readable Account of a Wall Street

I can't believe how just plain ignorant I was about the scope and speed of dangerous developments in the securities trading world! Read more

Published 16 days ago by T. Kirkpatrick
5.0 out of 5 starsFive Stars

Informative and very scary with regard to manipulation of the markets

Published 1 month ago by brigg10
4.0 out of 5 starsEasy Read

Working in the securities industry myself, this was an interesting ride through the backstory of some of the largest players in the game today and provided an easy read on the... Read more

Published 1 month ago by Matt
4.0 out of 5 starsA fascinating account of the high speed trading evolution

I'm not an industry insider so I cannot comment on the accuracy and completeness of the story being told but it's at least a riveting book to read. Read more

Published 2 months ago by bigbonustoday
5.0 out of 5 starsThe Rise of the Nerds on the Street

A great in depth review of the major players and companies who were involved in transforming securities trading through the use of computer networks,systems and processes. Read more

Published 2 months ago by Amazon Customer
5.0 out of 5 starsMuch better context on HFT than Flash Boys

I read Flash Boys and really enjoyed it, but came away not fully understanding what was going on. This book starts at the beginning of electronic trading and helps the reader... Read more

Published 3 months ago by D. Compton
5.0 out of 5 starsJust an excellent book that debunks the idea that government controls...

Just an excellent book that debunks the idea that government controls are the problem in the world's financial markets. In fact, the opposite is true. Read more

Published 3 months ago by PHLXCISO
5.0 out of 5 starsGreat read

Amazing insight into the high speed reading world and a great history/account of the subject matter. No other book comes close.

Published 4 months ago by Danyal

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