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Flash Boys
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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 7, 2016
This book was a good read that did a great job of explaining the world of high frequency trading and where it goes wrong. So many big names have come out hoping to eliminate the practice, we can only hope it gains traction.

The reason this book got 4 stars vs 5 is while the story telling is great and Lewis' writing style is great at simplifying complex topics, I wish we'd seen a bit better ending. I felt there could have been a wider implication drawn at the end and give us a bigger view of what IEX could do to change the other exchanges. This narrow focus makes a good story but doesn't give us a great picture of the current position within the landscape.

Also, the intense focus can lead to it almost feeling as an advertisement for the groups in focus.
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on May 2, 2014
Being a bit of a tech geek, I had heard about the rising phenomenon of high frequency traders (HFT). But I am not a finance guy, so the explanation that they help provide liquidity to the markets satisfied my nascent curiosity.

In May 2010 there was the much publicized "flash crash" where the markets went bonkers in a very short time. Alas, that was THE day I rolled my 401K from a previous employer, so I lost about $10K in the transaction due to the glitch. Suddenly I was much more interested and had a less than appreciative view of the HFT layer of the market. Still, there wasn't much objective, informative information that I was able to discern from the outside, and what there was was hopelessly gibberish to someone without a finance background.

Then I read the excerpt of this in the NYT, and knew I needed to read it cover to cover. The book starts as a simple detective story, where a really smart but mild mannered finance guy (apparently a rarity) has some odd behaviors at his trading desk. The investigation unravels the mess that is HFT, how they, by proximity to the exchanges, can divine the actions of big traders and then beat them to all the other exchanges to play the arbitrage game. And the more I read, the more pissed off I got.

Being a physicist, and having worked at a company that provides the network gear that drive this business, the pedantic revelation of signal distance traveled, versus the transit time was not a difficult concept to grasp. But that doesn't detract from the huge distortion that the HFT players make to the market. Performing 60% of the trades, and one boasting a 5 year record of always being ahead, they carry no position after the close of the markets.

Highly recommend the read, it can be followed by just about anyone, and it will clearly show that wall street is rigged against the ordinary investor, and the huge investor alike.
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on August 3, 2015
This is Lewis writing in his sweet spot. I have been riveted by Lewis' financial writing since Liar's Poker. For someone with a grad degree in Art History, Lewis' access and understanding of Wall Street is unrivaled. Like all Lewis novels, the characters are well-developed and the technical subject matter is seamlessly weaved into a compelling narrative. The book begins with an astonishing tale of a small group planning a fiber cable with less curves and turns than other lines between Chicago and Northern New Jersey. He then goes on to develop the complex backgrounds of technical traders and our hero, an RBC banker determined to change the system. If you are looking for an in-depth narrative around front-running trading strategies or is counter-measures, this is not the book for you. This is more of an expose on high-speed computer trading and the threat to the common investor. In that respect, the book hits it out of the park. Lewis brilliantly explains the current environment and its potential to harm our markets. I give this book five stars and cannot wait for more financial literature from Lewis rather than sappy books like The Blind Side.
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on March 3, 2016
This is an explanation of how high frequency trading works, and also an exposè of how HFT is routinely used to skim money from stock exchange transactions. Though the amount skimmed in an individual transaction is only a fraction of a cent the volume of transactions makes this add up to hundreds of millions of dollars taken from investors. The book is mainly about a group supported by the Canadian National Bank who (1) learned the operating details of HFT and (2) created a stock exchange designed to thwart the hidden skimming. The author writes clearly. He presents a real situation in an interesting manner. However unlike a novel, in the end the “good guys” wind up co-existing with the “bad guys”. The laws and regulations simply are not structured to prevent the HFT operations. Five stars.
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on May 10, 2014
Once again, Michael Lewis has provided tremendous in depth insight into the financial/investing world that at first sounds like fiction.

Amazing at what lengths financial institutions will go to make profits. Wonder what values some of these firms have other than Greed. The small investor like myself doesn't have a chance.

Having read the book, I've been mindful of the processing of my market purchase orders and have found that 9 times out of 10 they are processed at the top or above the spread.

In my opinion setting up a "black pool" in order to skim profit off of open market transactions is immoral if not illegal.Certainly profitable though! ($Billions)
Fascinating that Brad Katayama and associates have established a fairer process for individual orders to receive best possible prices at a new exchange "Investors Exchange", and that some of the big banks and financial institutions are not fully embracing the idea. Some HFT organizations are criticizing the new exchange and legally defending their processes as might be expected.

Stay tuned, I think Michael Lewis has opened the lid on some very marginal behaviors that are worthy of SEC and Government investigation. It's a very brave publication on his part.
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on July 22, 2014
There is more detail in this book than the average person can digest. But, the jest of it can be grasped. Kind of like the xfiles, the truth is out there if you look for it. The truth is not found on CNBC, Cable News, or the major networks. You have to look for it. A Random Walk Down Wall Street, and The Myth of the Rational Market are good books for the person just starting this quest for truth. Anything out there that exposes the real Wall Street is good for all, including Wall Street.

Flash Boys
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on April 14, 2014
If you've seen the talking heads on the news and business cable channels or read their online comments pooh-poohing this book, after having read the book I can say with a fair amount of certainty the those talking heads probably haven't read this book. So don't let those naysayers turn you away from this book.

The naysayer will tell you that high frequency trading doesn't hurt the individual investor because it's just a few pennies to them. But multiply that by all the trades done by all the individual investors over a year and now you're talking billions of dollars that have been taken out of the hands of the investors and put into the pockets of the HFTs who basically contribute nothing to the market.

It's a compelling story and well written, although I found the organization of the book to be a little disjointed at times.

I've worked in the IT industry for four decades and am intimately familiar with the networking technology discussed in the book. While Michael does an admirable job explaining the technical issues clearly and concisely, those not familiar with the technology may find those parts of the book a bit overwhelming.

It's an interesting cast of characters that come together to try and make things right in the market.
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on January 25, 2017
A good play by play on a technical subject written so that the lay person could understand it. One can get caught up in the epic battle between the "good guys" and the "Big guys" or rather the secret traders and big banks versus those who were trying to make the system transparent. I am not certain that success was well defined in these turf wars. As usual, the public is both unaware and unable to transform the system. Hopefully the light shone on these trades by this book will be helpful in bringing some clarity to the area of big banks, high speed trading and the world of nanosecond trading edges. It was a bit redundant and the footnotes were hard to follow in a Kindle format. However, I did like that there was an index and an attempt to bring some closure to a difficult topic that does not really have a discrete beginning and an end. Michael Lewis has again created a book well worth the readers time.
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on September 8, 2014
I'm almost sorry to like this book as much as I do because it reveals an underside of the stock market that is created and leveraged by a focus on making money on the trading side by taking real capital from investors. It details how intermediaries are using rulings by the SEC, that were intended to eliminate human error, to siphon ten's of billions of dollars out of the market each year - money that comes from fees paid by you and me and by lower returns by the brokers we use. It makes it difficult to read since you can't help seeing just how wrong it is, yet a large number of people in back rooms that you never see are doing it. The genie is out of the bottle, so it isn't going to stop any time soon.

That is the hard truth that this book uncovers. But, and more important, it also uncovers a bastion of people who have become aware of that ponzie scheme and have started to build an alternative market that equalizes the playing field. That story is fascinating and Lewis does a phenomenal job of explaining highly technical trading processes and why they can be leveraged by a few microseconds advantage. His writing style and informative, well researched approach to this complex situation makes for a very readable book. It has the pace of a good thriller but is even more enticing since it is real life. He characterizes the players in a balanced and neutral way. At the end of the book you are left with an understanding of what the issue is and the knowledge that some key people are trying to fix it. As painful as it is to read this book, it is a must read for anyone who is interested in how a simple analytic idea can bloom into something that seems subversive.

One of the greatest learnings I gained was that more regulation that tries to put a cap on the genie's bottle is only going to fail because each attempt will only open up another gap to be leveraged. These people have too much to lose and they can move much faster than any legislative body. What has to happen is for people like us who invest in 401k programs and stocks of companies we want to help start to request that our brokers use alternate paths to make those investments.
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