22 of 31 people found the following review helpful
Welcome to the dark side,
This review is from: Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market (Hardcover)
Welcome to the dark side. Mr. Patterson has followed up his best-selling The Quants, How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It with another 350 pages on the evils of evolving trading technology.
All you retail investors out there, abandon your floaties and race back to shore. There are man-eating computer bots in the water! And with each kill, they learn how to be more effective killers! And the life guard is pointing out the fresh meat!
See, now he's got me doing it. Mr. Patterson has such a deep love of analogy and hyperbole that it almost makes one wonder whether he lacked faith in his source material. Or understood what he was writing about.
Which would be a shame because he obviously conducted some great interviews and took the time to reconstruct the material into made-for-TV snippets. (You obviously can't publish best-selling non-fiction these days unless it reads a little like Raymond Chandler.)
Some of us who actually worked at firms like the New York Stock Exchange and Datek Online, devour these books looking for gotchas. Identify the obvious error (e.g. they didn't use hand signals on the trading floor of the NYSE) and you can refute all other factual statements regardless of your personal knowledge. But that's not the point; and this isn't simply another review by a whining insider.
Mr. Patterson, tell more of the story. (Maybe that's the next book.) Instead of spending page after page failing to explain the unexplainable (i.e. the Flash Crash); try taking on the context. How does an intra-day drop with a rapid recovery and broken trades on May 6th 2010, compare to a 23% drop on October 19th, 1987 regarding with respect to the impact on investors? Do institutional investors even care about your algo wars, or have they determined that the cost of building ecosystems to defend their whale-like behaviors actually exceeds their transactional losses?
As for the evil evolution of trading technology, yes, technological solutions always fail. It's called Murphy's law. But the unintended consequences actually drive the next innovation. Does the use of artificial intelligence portend the end of free markets, as you imply? Such thoughts always remind me of the people who blamed the crash in 1929 on that day's technical marvel: The telephone.