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on April 2, 2014
I retired from the hedge fund world and I can tell you that this book is mostly on target. For those who deny that HFT (high-frequency trading) is a rigged game, either they are un-informed or disingenuous.

It wasn't always like this. There was a time, when a bid was a bid, and an ask was an ask. If you liked the ask, you could hit the buy button and have a buy order confirmed instantly. Likewise, if you liked the bid, you could hit it and have a sale order confirmed instantly. That instant used to be measured in seconds or less. Then came along the HFT algo. All of a sudden, a bid is no longer a firm bid, and an ask is no longer a firm ask. You can hit the bid, but instead of selling instantly, you now become the ask price, and the bid just got lowered by a penny or more, and the market is moving away from you. Most of the time, the price move is a head fake - an illusion, trying to get you to trade at a price with "scalping" built-in against you. If you are willing to stick around, the precise price you want will return and you can have your trade. But other times when execution really matters, it was all real, the price you were willing to trade at just got shifted permanently right before your eyes and somebody "front-run" you.

I decided to retire, partly out of disgust, partly out of my lack of financial ambition. I learned a while ago, if the first million can't make you happy, that you have to accumulate more, you will never be content. If you have to play the rigged game to add more riches to your money pile that most human beings will never see in their lifetime, I feel sorry for you. Life is too short for me to play that game.

Addendum: This book was written for the lay person, so was my review. Sorry for not bandying about the jargons as some would expect, my bad. As much as I tried, I seem to have failed to write in plain English and draw the analogy to a functioning market. That's where Michael Lewis' book excelled, hence my recommendation. Granted, true free market doesn't exist in the financial world (no matter where you look, New York/London/Chicago/Tokyo). Only the naive will expect any market to give all participants the same level of positioning to engage in any transaction. My favorite analogy is my local farmers' market. When I show up to buy strawberries, some farmers/dealers have way more information on the supply and demand, and have inventory to reflect their view. They will rightfully make a profit when I buy the basket of strawberries from any of them. What I don't want to see is some jerk get in the way and buy up all the strawberries just before I hand my money to the seller, then turn around and sell the strawberries to me as if he had been the seller all along. The price quoted at my farmer's stand should be the price I can buy strawberries at, not a new price some jerk just jacked up to after seeing my intention to transact. I hope the description above clears any doubt about what this book is really about. It's not about someone having some legitimate edge after doing extensive research, or illegitimate edge resulting from inside information. It is about the financial market must be well functioning and free of unnecessary intermediation. That said, still two thumbs up on the book! For those who deny the unfairness of HFT front-running, either you haven't seen it (which should disqualify you from commenting on this topic) or you are so jaded that you can't see its harm (which begs questions about your integrity). As for myself, still happily retired after a short stint in the world of finance, thank you very much! I never learned much and never enjoyed rattling off the jargons.
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on June 26, 2017
One of the things I enjoy about Lewis's writing is his ability to explain difficult and complicated subjects. This one on high speed stock trading was no exception. Even though I am in the financial services field, there are aspects of this topic that were totally mystifying. Glad to see I had a lot of company and glad to see steps are being taken to reduce the opportunity to pick your pocket when trading stocks. The techniques may be legal, but they are far from fair or ethical. I think this book is best suited for those with some background in finance or serious investors. An enjoyable read if your interest lies in this direction.
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on May 4, 2017
You can't go wrong with Michael Lewis. I've read a few of his books. You can tell he does his research and interviews. He knows enough about finance to write these kind of books, but he's distant enough to appear neutral. This is a fair book, he's not just being anti-rich or anti-establishment, but he's giving enough grief to the villains to make it enjoyable. The good guys of the book seem like noble people.

The book is half technical / half good vs. evil. The ending does seem incomplete, but I think it's because he wrote it before all the dust settled.
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on June 18, 2017
Well, maybe I don't love it. Maybe I like it. I am prejudiced. Michael Lewis is unmatched in being able to explain clearly some of the more complex machinations of the money markets. In this case, the issue is manipulation of the stock market by having better technology..and putting it close to trading floor. OK, I know that does not make much sense on the face of it, but read the book. But it is another way the large, programmatic traders can beat the little guy--and Lewis makes the point without it becoming a Message. The Canadians are heroes (and how often do you read that in a review of a Wall Street subject?) The market is generally unscrupulous. It is unlikely to be fixed (if it is 'fixable') so long as we don't understand it..and most of us do not. Michel Lewis is the guy who can explain everything.
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on April 27, 2017
This book was great. Reading Michael Lewis is usually a sort of exercise in anger management for me, but he writes so well, I don't like to put him down. This story was almost a David and Goliath sort of underdog tale about some guys who took on Wall Street to found what they considered an honest stock exchange. Lewis also goes into great depth describing High Frequency Trading and how computers have completely changed our traditional notion of the stock market from a big room full of yelling people (think Trading Places) in colored blazers to an empty room full of servers all talking to each other. It was a fascinating book and I think anyone interested in learning how Wall Street works ought to read this book. Then, go out and get all Lewis' other books, too.
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on August 3, 2016
Michael Lewis "hits another one out of the park" with Flash Boys. If you have ever dabbled in the stock market or paid more than passing attention to the holdings in your 401k or other retirement vehicle, this book is a must read. Once again the so called guardians of our financial security are busy making themselves rich and gaming the system at our expense. This book provides more evidence that the big banks and financial institutions should never have been bailed out after the housing debacle circa 2008. When they left the poor unwitting homeowner with a declining asset and debt they could never repay holding the bag and ultimately losing their home to vultures! If the bailout had been used to refinance and keep people who could afford to pay at reasonable rates in their homes that would make sense. What actually happened was a travesty perpetrated by the banks in "partnership" with our government.
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on February 7, 2017
Before reading this book I thought i knew what high frequency trading was, boy was I wrong.
Michael Lewis uses clever and engaging storytelling to outline the disruption HFT wrought on public stock exchanges and how the big banks and investors reacted to the new player. Using Brad Katsuyama, a former trader for the Royal Bank of Canada, as a protaganist, Lewis outlines the slow path to understanding that Wall Street took towards the new player and emphasizes the steps that HFT took to obfuscate their process. Through Katsuyama and his team of traders, the author reveals the unfairness that HFT introduces to the market via very low risk, high profit trading that utilizes high performance computing and low latency to shut out traditional market players.

A highly engaging and sometimes infuriating read that highlights the current state of Wall Street trading and how the cards are frequently stacked against the average investor.
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on December 22, 2016
It's a fascinating example of resilient and adaptive systems while still telling a good story. There are many characters, each with their own stories, motivations, and plots. One of the most interesting non fictions I've read. And the story is still ongoing if you follow up with financial news! 10/10!
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on January 30, 2017
This book is an interesting "story" ... but it leaves me very suspicious. If I were sitting in the meeting where it was first proposed that HFT be tried I would have been able to immediately describe how it could be (and should be) neutered as a tactic ... at virtually zero cost.

HFT requires two things: (1) timing predictability and (2) being able to "cut in line". Both of those needs are easily made impossible. Thus, a process can be designed that makes both impossible. And just like the whole HFT process requires quick adaptation, the process could have easily imposed a fix as an adaptation. Further, IEX could have designed their process with such an adaptation even if the others didn't. Their strategy would have remained the same: Attract business by being fair to everyone ... i.e. treating everyone the same ... i.e. unpredictable and sufficiently long latency ... not just in the order time stamping, but throughout the system responsiveness. Investing is not something about changing trading decisions within mili-seconds of committing to them. It is, by definition, a much longer term decision. Thus, any latency making all players equal would have no effect on the principal purpose of the process ... to bring buyers and sellers together in a fair, non-gamable, process.

I'll now just give some of the annotations I made to the book in the order I made them (with the hope the author sees them):

Pg. 174: "for instance one professor suggested a 'randomized delay'" ... and later: "Someone will just flood the market with orders" was mentioned as why this would not work. But it obviously would work. If no one can predict the process timing, no one can benefit from that timing. Focusing just on the orders was not the solution. But here, randomizing was just dispelled by this simple assertion and never brought up again. A $300 million secret effort taking over a year (i.e. the fiber from Chicago to NYC) would have been neutered in a matter of weeks ... or even days of becoming visible. Way before it could repay itself.

Pg. 177: "To create a 350-microsecond delay, they needed to keep the new exchange roughly thirty-eight miles from the place brokers were allowed to connect to the exchange".
With randomized latency this was unnecessary. With a "known" latency, it isn't even effective. I had seen the "coil the fiber" when working for a major telecom carrier six years earlier. They had the fiber on a spool and just tapped into the ends ... no big deal at all. Again ... that really fixes nothing, just moves the issue 350 micro-seconds down the road. Nobody wins by betting on the instant replay if all everyone sees is the instant replay.

Pg. 194: "You couldn't see the plane," he said. "You just saw the explosion".
Did "anybody" see the plane? Why did WTC7 mysteriously fall down? These people keep behaving like they believe the government's 19 cavemen with box cutters conspiracy theory tale.

Pg. 277: "The authorities evidently felt the need to leap into actions, or to appear to"
The "or to appear to" speaks volumes. The "authorities" are well known to be co-conspirators.

Pg. 281: "These savings were fully realized by 2005 and were enabled less by high-frequency market-making than the Internet, the subsequent competition among online brokers, the decimalization of stock prices, and the removal of expensive human intermediaries from the stock market."
The part regarding the "internet" is nonsense. If you didn't subscribe (and pay a fee to a broker or a data feed), you had a 15 minute delay in price reporting ... on the TV and on the internet. You were betting on the instant replay. Do you think that fact was there to protect the little investor?

Pg. 281: "the cost to investors of trading in the U.S. stock market has, if anything, risen... possibly by a lot."
This is absolute nonsense. Just digitalizing the spreads removed enormous cost. Then reducing and removing human interaction removed still more cost. All that HFT was about was front running and picking up crumbs. In the oil field, a business called "gathering" tapped into flaring gas. In the accounting business, diverting to a special account rounding to the penny residue did the same thing HFT is doing. It's not new. And it's not going away. Government regulators "always" enable such things.

Pg. 282: "The attention became focused almost entirely on high frequency trading..."
The fact that high frequency trading was cost effective was proof it was a bad guy. It could have been neutered by introducing random delays...within days of the scheme going live. Such a simple fact would have kept someone from trying to go live with it in the first place.

Pg. 282: "but perhaps it's too much to expect Wall Street traders to worry about the social consequences of their actions."
People will "always" act in their own self interest. And that is "always" enabled by government when it comes to really big scams. Being a "nation of laws" instead of "a nation of principles" makes it legitimate. If it's not against the law, it's ok. Thus we get 40,000 new laws each year.

Pg. 282: "I honestly don't fee that strongly about high-frequency trading."
Oh really? How do you feel about "gaming" the process.

Pg. 282: "If I didn't do more to distinguish "good" HFT from "bad: HFT, it was because I saw, fairly early on that there was no practical way for me or anyone else without subpoena power to do it".
There is "no" good HFT. Follow the money! He got all the information he needed in simple conversations ... no subpoenas at all. It would never have been tried if proper transparency and process existed. It was obviously gaming...masquerading as arbitrage. Random delay would have rendered it impossible from the beginning!

Pg. 282: "... firms need to reveal the contents of their algorithms"
No they don't. That just opens a new attack vector. Who gets to see those algos first? Make it impossible for any algo to have an advantage. That's the solution! Random delays deliver that solution.

Pg. 283: "They designed IEX to eliminate predatory opportunities created by speed".
And all they had to do was introduce random delay to those using their process. This neutered all HFC advantage yet doesn't resort to knowing what that advantage might be. Interestingly there's no mention of the tactic of placing orders and immediately canceling them. The process allowed that.

Pg. 286: "If this story has a soul, it is in the decision made by its principal characters to resist the temptation of easy money and to pay attention to the spirit in which they livce their working lives."
This is what hit me first about HFC and gaming processes in general. It sanctions cheating in a game as a valid tactic. This is why we need to be a "nation of principles"; not a "nation of laws". People violating principles will be naturally ostracized. Laws just deem everything not against the law to be lawful.

Pg. 286:"That some minority of Wall Street is getting rich by exploiting a screwed-up financial system is no longer news".
As if it ever was news. The government scheme of looking the other way and then fining as a new income stream is becoming government (and those they regulate) modus operendi. Ostracize both!

Pg. 286: "All they need is a little help from the silent majority"
What they need is a little help from plain ole common sense. The silent majority is the "clueless" majority. By my poll, less than 6% of USA voters know anything about WTC7.
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on June 7, 2014
I don't know enough about the mysteries of Wall Street, much less of high frequency trades (HFT's), to even guess whether Lewis' scathing indictment is factually accurate or not. From other reviews is appears that even those claiming knowledge aren't sure, either. But I have a bias--I am a "where are the customers' yachts?" observer, who believes that the function of the SEC is the same as that of the police who arrest a young basketball player for "point shaving"--protecting the professional gamblers so they can about in peace their business of fleecing the suckers. Just so, Lewis assets, repeatedly and forcefully, that the HFT's are basically front running other investors, gaming the market, and that It is the very systems the SEC has required of the markets that makes this possible.

What is, in my view, far worse than the game playing by the high frequency traders is that, according to Lewis, it is the exchanges themselves that make this possible to those traders willing to pay the price. Recently there was a flap about some organizations giving brokers an advance look at reports they were about to release which could affect the market, in exchange for which advance look, the brokers paid a "fee." Or we could call it a bribe. . How much worse to give the HFT's an advance look at the prices of stocks being traded, and at the book of bids and offers. Basically enabling front-running.

As I said, I don't know whether Lewis assertions are correct. If he is correct that large sums of money trade hands to increase the efficiency of HFT's, I suspect that those guys plan to get the money back by out-smarting the market. It may be that they are performing a function, but since they seem to go to great lengths to conceal what they are doing, and how much they are making by doing so, one does wonder.

Most importantly, I am disquieted that I have heard nothing in rebuttal from the SEC. I do not consider praise for the HFT'S a rebuttal. I want to know if the exchanges are selling access to information which should be confidential, and, if so, why the SEC does nothing about it.

As for the book, it is written in Lewis generally winning style, and is a fast read, subject to one criticism which may be personal to me. I found that his repeated use of "f word" added nothing to the story, and ultimately became aggravating. I was an enlisted man in the Navy for 4 years, and don't recall having heard that word as many times in those four years as it was repeated in this book. It could easily have been excised, probably to the benefit of the story, and certainly without doing it any harm. For that reason I have withheld the fifth star. Otherwise it is a "must read" for those who care about capitalism.
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