http://www.bloombergview.com/articles/2015-04-24/michael-lewis-has-questions-about-flash-crash
BTW Flash Boys is the only Michael Lewis book that I didn’t like so far.
^ +1
IMO he’s just trying to sensationalise the whole situation.
So unfair to carpet bomb the entire electronic trading business the way he’s done since he wrote that book
I just finished it last week and I didn’t like it as much as Liar’s Poker or The Big Short, but I really didn’t have a problem with the approach in Flash Boys. He’s writing to a non-finance audience and needs to paint with broader strokes that might paint a darker picture of the situation than is warranted in reality. Latency arbitrage , perhaps on the level of actual front running in some instances, is a drag on efficient markets and that cost is a transfer of money, however small, from the market as a whole to HFT’s. If there was actual liquidity and market making going on as a result, perhaps the thousandths of a penny per trade would just be part of the price to play, but it seems like the market is neither cheaper, more liquid or more efficient as a result of HFT’s, at which point, what purpose are they serving?
I’m a buy and hold guy, so I’m not really losing anything, but I think there is a legitimate risk to investors and market stability that is brought on by the activity of HFT’s in an exchange, and it seems like the benefits aren’t outweighing the risks.
Sorry, but I totally disagree with this statement.
Today, you can buy atleast a million vegas in index markets without having to call a broker or checking with a few banks - why? Because of the technology that ML is dammning. We should definitely shut it down if benefits don’t outweigh its cost/potential for exploittion but IMO its benefits quite significantly outweigh the risks.
Here’s the link for DoJ’s official complaint.
Try to read it in its entirety. If you can, you’d realise a lot of DoJ’s allegations are quite flaky and can be seriously challenged in court with help of someone who has a background in this business.
This. Never understood why this book caused so much butt hurt when this is IMO such an unarguable fact. Volume =/= liquidity. Apparently everyone who works in finance is running a latency arb operation on the side. #themoreyouknow
I agree with what you’re saying but also disagree to some extent. Technology has naturally increased access to the market, it however has also fragmented it at the same time. To give HTF credit for the electronification of market infrastructure isn’t entirely fair. Have they helped push it along? Absolutely
^ Yes, Exactly. +1
I posted ^ on the forum a whle back. That dude is awesome. I still don’t understand everything he posts, but its fascinating what he finds.
Saw Ronan Ryan from IEX speak. He laughed when asked if HFT might narrow the spreads on some low volume issues. He said HFT does not add liquidity or lower spreads on average. Liquidity is not volume. Liquidity is handling volume without price movement. HFT algos withdraw orders has soon as they are “tipped.” They are not modern day market-makers. He made a very convincing case with real world examples. He claimed pennies are even being scalped on the smallest of issues. The pay for order flow agreements are another one of his issues. Entertaining character for sure. If you have the opportunity, go see him speak. He’ll take all questions. You’ll quickly realize he knows more about this than you or your firm and your pockets are being picked. He literally was the telecom salesman/technician that helped the pioneering HFTers get started.