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Flash Boys
Flash Boys: A Wall Street Revolt is a book by the American writer Michael Lewis, published by W. W. Norton & Company on March 31, 2014. The book is a non-fiction investigation into the phenomenon of high-frequency trading (HFT) in the US financial market, with the author interviewing and collecting the experiences of several individuals working on Wall Street. Lewis concludes that HFT is used as a method to front run orders placed by investors. He goes further to suggest that broad technological changes and unethical trading practices have transformed the U.S. stock market from "the world's most public, most democratic, financial market" into a "rigged" market.
Flash Boys maintains a primary focus on Brad Katsuyama and other central figures in the genesis and early days of IEX, the Investors' Exchange. Sergey Aleynikov, a former programmer for Goldman Sachs, serves as a secondary focus.
The introduction begins by naming Aleynikov and describing his arrest, along with the author's personal history on Wall Street, as the impetus for writing the book. The first chapter tells the story of a $300 million project from Spread Networks that was underway in mid-2009—the construction of an 827-mile (1,331 km) fiber-optic cable that cuts straight through mountains and rivers from Chicago to New Jersey—with the sole objective of reducing the transmission time for data from 17 to 13 milliseconds between the Chicago Mercantile Exchange and Nasdaq. (The construction of the line was dramatized in the 2018 film The Hummingbird Project.)
Lewis goes on to describe the modern world of electronic trading and how it differs from the past—when trading was mostly performed in open outcry pits on physical trading floors—and how that change has impacted the market. The speed of data is a major theme in the book; the faster a market participant's computer system can receive and act on data, the better their edge, and opportunity to profit, with even nanoseconds making a difference.
The central story details financial executive Brad Katsuyama's discovery of how access to this fiber-optic cable—as well as other technologies and special arrangements between HFT firms, exchanges, and large Wall Street banks—presents an opportunity for those insider institutions to profit at the expense of retail investors. To counter this, Katsuyama bands together a team that sets out to develop a new exchange, called IEX, designed specifically to prevent the unfair advantage enjoyed by HFT firms in the rest of the market.
The final chapter is dedicated to the tribulation of Sergey Aleynikov, a former Goldman Sachs programmer twice prosecuted and twice acquitted for a single act of allegedly copying proprietary computer source code from his employer before joining a competing firm.
The epilogue details the author's bicycle journey to observe a string of microwave towers along the same stretch as Spread Networks' fiber-optic line. Lewis notes that the time to send a signal from Chicago to New York and back by microwave signal is about 4.5 milliseconds less than to send it by optical fiber but, when Spread Networks was laying its line, the conventional wisdom was that microwave transmission's data capacity was too limited and unreliable due to sensitivity to inclement weather. "But what if microwave technology improved?," the author wondered. The story ends as the author climbs up a mountain summit where one of the towers is stationed. He notes the tower showed signs of age, and could have been erected some time ago, for some other purpose, but the ancillary equipment including a generator, a concrete bunker, and repeaters that amplify financial signals, were all new.
The book has drawn criticism from some academics and industry experts, particularly on Lewis's views on HFT and other claimed factual inaccuracies in its description of trading strategies. Other critics have praised Lewis's explanations of trading concepts and concurred in his criticisms of HFT. However, it is suggested that he neglected to pay attention to the larger issue of financial regulation, and excessively simplified the relationships between institutions in the financial market. Some industry executives have dismissed the book as "closer to fiction". Michael Lewis responded that those who said he "got it wrong" have a financial stake in the existing system.
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Flash Boys
Flash Boys: A Wall Street Revolt is a book by the American writer Michael Lewis, published by W. W. Norton & Company on March 31, 2014. The book is a non-fiction investigation into the phenomenon of high-frequency trading (HFT) in the US financial market, with the author interviewing and collecting the experiences of several individuals working on Wall Street. Lewis concludes that HFT is used as a method to front run orders placed by investors. He goes further to suggest that broad technological changes and unethical trading practices have transformed the U.S. stock market from "the world's most public, most democratic, financial market" into a "rigged" market.
Flash Boys maintains a primary focus on Brad Katsuyama and other central figures in the genesis and early days of IEX, the Investors' Exchange. Sergey Aleynikov, a former programmer for Goldman Sachs, serves as a secondary focus.
The introduction begins by naming Aleynikov and describing his arrest, along with the author's personal history on Wall Street, as the impetus for writing the book. The first chapter tells the story of a $300 million project from Spread Networks that was underway in mid-2009—the construction of an 827-mile (1,331 km) fiber-optic cable that cuts straight through mountains and rivers from Chicago to New Jersey—with the sole objective of reducing the transmission time for data from 17 to 13 milliseconds between the Chicago Mercantile Exchange and Nasdaq. (The construction of the line was dramatized in the 2018 film The Hummingbird Project.)
Lewis goes on to describe the modern world of electronic trading and how it differs from the past—when trading was mostly performed in open outcry pits on physical trading floors—and how that change has impacted the market. The speed of data is a major theme in the book; the faster a market participant's computer system can receive and act on data, the better their edge, and opportunity to profit, with even nanoseconds making a difference.
The central story details financial executive Brad Katsuyama's discovery of how access to this fiber-optic cable—as well as other technologies and special arrangements between HFT firms, exchanges, and large Wall Street banks—presents an opportunity for those insider institutions to profit at the expense of retail investors. To counter this, Katsuyama bands together a team that sets out to develop a new exchange, called IEX, designed specifically to prevent the unfair advantage enjoyed by HFT firms in the rest of the market.
The final chapter is dedicated to the tribulation of Sergey Aleynikov, a former Goldman Sachs programmer twice prosecuted and twice acquitted for a single act of allegedly copying proprietary computer source code from his employer before joining a competing firm.
The epilogue details the author's bicycle journey to observe a string of microwave towers along the same stretch as Spread Networks' fiber-optic line. Lewis notes that the time to send a signal from Chicago to New York and back by microwave signal is about 4.5 milliseconds less than to send it by optical fiber but, when Spread Networks was laying its line, the conventional wisdom was that microwave transmission's data capacity was too limited and unreliable due to sensitivity to inclement weather. "But what if microwave technology improved?," the author wondered. The story ends as the author climbs up a mountain summit where one of the towers is stationed. He notes the tower showed signs of age, and could have been erected some time ago, for some other purpose, but the ancillary equipment including a generator, a concrete bunker, and repeaters that amplify financial signals, were all new.
The book has drawn criticism from some academics and industry experts, particularly on Lewis's views on HFT and other claimed factual inaccuracies in its description of trading strategies. Other critics have praised Lewis's explanations of trading concepts and concurred in his criticisms of HFT. However, it is suggested that he neglected to pay attention to the larger issue of financial regulation, and excessively simplified the relationships between institutions in the financial market. Some industry executives have dismissed the book as "closer to fiction". Michael Lewis responded that those who said he "got it wrong" have a financial stake in the existing system.