Flash Boys A Wall Street Revolt PDF/EPUB è Flash Boys

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Flash Boys A Wall Street Revolt I was a back office spreadsheet jockey performing daily reconciliations on non dollar swaps for a merchant bank in London in the late 1990's They employed me because I had a background in corporate accounts but mostly because I looked good in a skirt and knew how to put a bet on a horse at lunchtime To start with it was fun The volume and value of transactions was unlike any job I'd had before but eventually I became uncomfortable because I was starting to fall behind When I explained the situation to my line manager he had a word with his boss and they sat down to look at my process I couldn't match the transactions fast enough because I wanted my reconciliations to show actual trades I wanted to match the buy notes with the sell notes They understood and encouraged me to ask the US office for information on the trades I was having trouble with The US office replied You should know how to do this by now Don't match them just batch them until you catch up So I did Every day everyone on my team would receive a new spreadsheet containing trades worth hundreds of millions of dollars to reconcile for their particular variation of financial instrument and as long as I was around USD100000 under or over at the end of each day I was told that that was than good enough In some ways it was I understand the term material but grew and uncomfortable with my role and no I never ever caught up It was the scale of it that really concerned me I was just one person on one floor in one bank in one city There would have been tens of thousands of us working like this I left because my visa ran out but I was so relieved to go Reading Flash Boys A Wall Street Revolt has been like seeing a therapist I cannot emphasise enough what a relief it was to read about people working in that sector much recently uestioning the fundamentals of what they were doing and then having the courage to create change All I saw and I was party to it for uite a while were people who just needed a job and would keep taking that pay packet for as long as they could These were the days when my corner store stocked Verve Cliuot next to the milk and for my very menial 40 hour a week role I was earning enough to buy three bottles an hour If you have a slight interest in financial markets you'll lap this book up For those who're feeling a little cynical about the author's viewpoint I still think you'll find it a page turner Highly recommended This book is wonderful; it is well written engaging and the subject is fascinating I had never given much thought to stock exchanges trading and the processes that occur there Michael Lewis manages to make the subject transparent and interesting He describes the activities of so called High Freuency Trading HFT where buy and sell orders to stock exchanges are intercepted and prevented from occurring at the stated price These HFT activities go on largely unnoticed though they account for much of the activity in stock trading And they skew the market in a way that robs huge amounts of money from legitimate investors Also I learned about the soj called dark pools the non public stock exchanges that the public never hears about They play a large role in the way big banks earn money from brokers and high freuency tradersThe first half of the book gives the background behind HFT how it operates and why it is allowed even encouraged by the big banks The second half of the book describes how Brad Katsuyama an executive at Royal Bank of Canada uit his job to start up a new stock exchange that would do its best to level the playing field He set up the new Investor's Exchange IEX an alternative trading system that does its best to prevent HFT from profiting This exchange is now less than a year old but seems to be doing very well It is the ONLY stock exchange that actually publishes its rules making the process transparent to investors and brokersI didn't read this book I listened to it as an audiobook Dylan Baker is that narrator and he does a very good reading He certainly kept me engaged and wishing the book would not end #1 New York Times Bestseller — With a new AfterwordIn Michael Lewis's game changing bestseller a small group of Wall Street iconoclasts realize that the US stock market has been rigged for the benefit of insiders They band together—some of them walking away from seven figure salaries—to investigate expose and reform the insidious new ways that Wall Street generates profits If you have any contact with the market even a retirement account this story is happening to you “Shining a light creates shadows” ― Michael Lewis Flash Boys There was a temptation to write my review before I had finished reading To get there first before other reviewers This race to be first however sometimes reuires a pause a reflection about what speed transparency fairness actually reuires from individuals and companies The world of finance is often opaue Between executing a trade with your broker and another individual accepting that trade through their broker there is a ghost world operating on mico slices of a second It is a world filled with algorithms that are all focused on a zero sum game where the individual seems to lose every single trade It is a wild west where everyone is getting the shaft except for the large banks and the high speed traders“Every systemic market injustice arose from some loophole in a regulation created to correct some prior injustice”No one is better at exploring the technical world of money and finance on Wall Street and in Sports than Michael Lewis His talent is most obvious in his ability to spot inconsistencies absurdities and flaws in a system and explain them using great characters and narratives that the characters tell themselves There is no Moneyball without Billy Beane there is no Blind Side without Leigh Tuohy and Michael Oher and there is no Liar's Poker without John Meriwether and John Gutfreund There would also be no Flash Boys without Sergey Aleynikov Brad Katsuyama and Ronan Ryan“The US financial markets had always been either corrupt or about to be corrupted”These characters MAKE this book great Lewis however is what makes this story vibrantly great He is a master of the New New Journalism narrative a master of timing and a master of getting to the story before the other suckers do And he appears to do it not just because he is fantastically good at it but from all appearances because like Brad Katsuyama Lewis actually gives a micro F about making the system deliver on its promise It's All Rigged FolksThe seemingly democratic 'market' is a class system and the name of the game is speed There is a hierarchy of speed in place and the haves are looting the have notsTaleb made a name for himself ridiculing the markets the experts and the traders attributing whatever money these blokes made to dumb luck Nobody can game the market he said We all liked that Yes they might make money but they sure as hell do not deserve to be smug doing so Plus at least we can also play in the same markets and have the same long odds Lewis asks to look closer and exposes that the markets are not just populated by lucky dupe artists trying to pass themselves off as smart but by super tech ninjas with unknown super powers Ok so these guys not only make money but are also gaming the market so that they cannot lose at all? They are borderline illegal in making their money? Now we cannot play in the market at all? Not only is Wall Street primarily for the top guns but is it also becoming and an exclusive club where the rest enter only to be skinned?The game is thusYou see the ticker price on your screen and place an order to buy some shares The order is then transmitted electronically to the exchanges to satisfy your order However it is going to take some time getting there and just like Flash does in those comics there are traders who can check on your order run ahead of it and place an order themselves to buy the same shares then turn back and be waiting for your order when it arrives so that they can sell the shares you need to you They take no risk this way since they engage in the market only when they have an assured buyerseller “As soon as you realize this” he said “as soon as you realize that you are not able to execute your orders because someone else is able to identify what you are trying to do and race ahead of you to the other exchanges it’s over” he said “It changes your mind”It was as if only one gambler were permitted to know the scores of last week’s NFL games with no one else aware of his knowledge He places bets in the casino on every game and waits for other gamblers to take the other side of those bets There’s no guarantee that anyone will do so; but if they do he’s certain to win So yes some can play the market and make no losses whatsoever for years on end precisely because they take no riskGo here for a detailed summary it is worth understanding this is an interesting concept and it is also a story that needed to be told but it did not reuire these many pages to do it in Lewis drags the story to such an extent that it almost grinds to a halt a times The detailed story on the laying of the high speed cable the story about the engineer who helped GS in managing their HFTs the rise of the wallstreet nobody etc adds nothing to the core story which is about how a bunch of good guys from wall street gasp tracked down what was happening and did their best to put an end to it Most of Lewis' books have stuck to the story of one guy or a group of people working their way through a maze being very clever doing so and coming out with game changing revelations That works But this time around the material was not large enough perhaps because Big Finance is closely guarded than most fields? and uite unfortunately Lewis decided to pack some peripheral stories in It added nothing and diluted the sense of adventure It just made the core detective story less exciting I would have preferred this helping in half the number of pages or less Much of it was a waste of time but the message was notThe Core Message The entire history of Wall Street was the story of scandals linked together tail to trunk like circus elephants Every systemic market injustice arose from some loophole in a regulation created to correct some prior injustice No matter what the regulators did some other intermediary found a way to react so there would be another form of front runningFirst there was nothing new about the behavior they were at war with The US financial markets had always been either corrupt or about to be corrupted Second there was zero chance that the problem would be solved by financial regulators; or rather the regulators might solve the narrow problem of front running in the stock market by high freuency traders but whatever they did to solve the problem would create yet another opportunity for financial intermediaries to make money at the expense of investorsThe final point was aspiration than insight For the first time in Wall Street history the technology existed that eliminated entirely the need for financial intermediaries Buyers and sellers in the US stock market were now able to connect with each other without any need of a third party “The way that the technology had evolved gave me the conviction that we had a uniue opportunity to solve the problem” he said “There was no longer any need for any human intervention” If they were going to somehow eliminate the Wall Street middlemen who had flourished for centuries they needed to enlarge the frame of the picture they were creating “I was so concerned that we were talking about what we were doing as a solution to high freuency trading” he said “It was bigger than that The goal had to be to eliminate any unnecessary intermediation”Drive out the middle men even as they cry doom at the prospect of a market without liuidity? That is what IEX and the ultra computerization brand of anti predator customer solidarity and euality presented by Lewis is really advocating If you think about it that is a body blow to some of the most cherished concepts of capitalism itself Michael Lewis explains how the stock market became such an incomprehensibly unfair system as a natural byproduct of human greed and animosityAt one brief point in history we viewed investing as a way to make the world better off for everybody involved But then Wall Street's greed took over starving for instant gratification and turned investing into a zero sum game the only way they see a win is if ordinary hard working productive members of society loseIn Flash Boys the financial system is operating as a singular short sighted monster striving to bring the entire world to its knees But a few white knight Wall Streeters are revolting against the beast and they're winning It's like David vs Goliath except with higher stakes Michael Lewis turns the story of Brad Katsuyama and IEX into the Hero's Journey to the promised landIn typical fashion the story starts as a plot based thriller becomes an incomprehensible mystery of high freuency stock trading then a parable of what's gone wrong with civilization and finally it ends on a bleak note of hope that the good guys will come out ahead and bring all of society with them like has always happened in the pastThe biggest problem for me is that what Michael Lewis is known for explaining crazy complicated things in a way anyone can understand he doesn't really even attempt here He's both short on details about high freuency stock trading and repetitive He spends a lot of time explaining the obvious like how granting unfair access to information to private parties corrupted the entire system But gloses over almost everything else including or less the resolution how Brad Katsuyama and IEX are actually fixing it In all honesty I picked this up as Wall Street and the stock market are something I have an intetest in but little acual knowledge of Whilst definitely an interesting read and providing the right amount of shock factor I felt like I was just skimming some areas without digesting any of the information Maybe this is to do with my own limited understanding but it felt like the core story was dragged and repeated to reach the subsuuent length This overtelling led to any feeling of shock at the corruption detailed becoming muted and my enjoyment waned a little as the book progressed This story is definitely one worth reading but be pre warned that there is a fair amount of repitition On Reading RatingFor my money which since I'm neither a Wall Street tycoon nor a Russian coding genius isn't a whole heck of a lot this isn't Michael Lewis' best work My reading experience was a mix of fascination and frustration Why the latter? Lewis covers and condemns a whole bunch of different things Agreement aside as a human who reads books this lack of distinction is what resulted in the bulk of my star docking I'd give it a 255 if half stars were street legal around here and I'm guessing some of the backlash against the book among insiders Lewis' books often seem to spawn ‘for’ and ‘against’ camps but with this one I can't for the life of me figure out where I fall I was hoping to have come to a resolution before attempting to write a review but as time passes it seems like that's just not in the cards Since Flash Boys evoked some pretty heated internal debates between Mara and Other Mara I'm gonna let you know where I'm coming from by all means feel free to skip ahead—I'll even spoiler ize this section it all the skipable for youview spoilerMy knowledge of markets and how they work in general is definitely skewed Lacking any sort of formal training most of what I know comes from reading popular economics featuring the behavioral side of things eg what's going on in the head of this so called homo economicus and I definitely love a good narrative account of financial crises new and old Other relevant characteristics? Well I'm terrible at capitalism I dabble in uantitative analysis and other data y goodness by day and often find myself wanting to ualify everything I do with ‘but I used framework or package x y z’ as if otherwise everyone will assume that I derived my results from first principles it's ridiculous I know and I'm working on it That being said I'm also learning that people are willing to pay you despite my protests for accessing and compiling information that's out there for free because well you know how to get it and they simply don't have time hide spoiler Honestly investment and stock exchange is something that bores me to death so I was putting off having to read this one for a while and today I forced myself to get it over with I was surprised to find that the book was really interesting though I had no clue about High Freuency Traders or dark pools or even the arrest of Sergey Aleynikov which is honestly absurd I think the information was accessible and easy to understand but I don't think it would be interesting to anyone who didn't have some interest in the engineering or math of the whole thing I did feel bogged down by the details though especially of the people involved and their back stories I know the whole purpose of the book was to talk about the small group of people trying to change things but I thought all the logistic stuff was the most interesting aspect of the book The new book by Michael Lewis criticizing high freuency trading has created uite a stir I’m imaging what a PR response might look like though not an entirely serious one It’s structured in FA format but the uestions aren’t really freuently asked so much as ones I’d like to answer The ideal audience would be the inuiring readers of Flash Boys open to a counterbalance Who is this Michael Lewis guy and why has this book been making such a splash?Lewis is an influential writer with a talent for making his readers feel smart It’s like they’ve been given inside access to some previously hidden world Depending on the book it could be an intimate understanding of how richly compensated alpha males at a trading desk on Wall Street dominate the poor schlubs Liar’s Poker how a cash constrained baseball executive can use statistics to cobble together a winning lineup Moneyball how the geniuses of modern day football came to realize the importance of a great left tackle in protecting the uarterback’s butt Blind Side or how a select few investors could foresee the folly of investing in subprime mortgages doomed to default The Big ShortAnd he does this in a readable way He explains complicated mechanics in understandable terms he identifies heroes and villains and he structures his narrative like any good writer would building to conclusions after couching them as mysteries or puzzles for his brainy protagonists to solveWhile Flash Boys features many of those same traits it seems less like good investigative journalism this time In fact it feels like marketing literature or maybe a prosecuting attorney’s closing argument Lewis has been criticized for not having spoken to anyone who knew about HFT high freuency trading from the other side of the fence That’s the raison d’etre for this FA of sorts Let’s wade in the same way Steve Kroft did with Lewis in his 60 Minutes interview What’s the headline here?Essentially this Michael Lewis is going to sell a whole bunch of books and will end up by dint of some serious negative spin manipulating public opinion way than HFT has ever manipulated markets Is the industry reeling from the critical language? You and your market rigging ilk are evidently a “cancer”; nothing but “parasites” In addition in an impressive burst of lawyerly bombast financial fraud attorney Andrew Stoltmann describes you as “little than digital piranhas creating feeding frenzies that can send the market into volatile spasmodic fits” leaving “a trail of carnage”Yeah but aside from that we’re not so bad Seriously it’s frustrating when you know something is at worst light gray and someone with a microscope comes along training his lens on the black pixels only saying “Oh look how black it is; and hey there’s another one” And it doesn’t help when the lens is smudged so that each one he focuses on seems darker than it really is You’ll admit Lewis did a good job choosing his hero right? If there’s such a thing as Boy Scouts of Canada I bet Brad Katsuyama earned every one of their badges He’s bright hard working earnest and no doubt set the standard for what the Royal Bank of Canada called “RBC nice” He’s the one who explained to Lewis and others what was happening when he attempted do a big trade A split second after he’d enter his order the market dried up on him The uantities displayed on his screen at his targeted price were disappearing before he could get all he wantedYou’re right about Brad He does come across well To be honest though at first he was a little naïve He was somehow expecting that his order for say 100000 shares wouldn’t have an immediate price impact that reflected the new knowledge of a big and abiding appetite Even back at that time most sophisticated players in the market knew they’d have better luck breaking their order up trading chunks here and there at different times and different exchanges as liuidity would allow rather than spooking the market with an order size that was bound to change the euilibrium price in an instant Yeah but what about the front running where speed demons would take their knowledge of Brad’s intention to buy and go to other exchanges to buy ahead of him driving up the price and making Brad pay to get all the shares he wanted?OK first of all please use uotes when you use the term front running In fact don’t use it at all Front running properly defined is an immoral and illegal act where a brokerage firm uses knowledge of its own customers’ orders to jump ahead of them in the market in anticipation of easy profits when the customer transactions cause the price to change Anybody doing that truly is scum They’ve broken the fiduciary trust may make their customer pay by the time the order gets to market and have stolen privileged information to advantage themselves Back to the issue at hand is whatever this thing is that you don’t call front running fair? Brad our authority on what’s “nice” didn’t think soA certain segment of the market probably does consider itself put out by these fast changing conditions But we need to look at the situation from a broader perspective Once I explain I hope you’ll see why not everyone agrees with our “nice” friend Is this something we can understand by way of the company Lewis made up to illustrate his point – Scalpers Inc? They’re the ones who would hastily get in ahead of every investor order buy up all the shares then sell them to the investor at a higher price after front running running in front of themGrrr – “running in front of” – for that I’m going to double the length of my response So in Lewis’s unrealistic example we’re to believe that those rascals at Scalpers Inc somehow know with great certainty that the poor honest investor has a certain size trade to do somehow skips ahead in line to snap up those shares raises the price and imposes its insidious tax all without risking a dime Bzzzzzzt Wrong I’m sure Lewis would argue that this example was concocted for pedagogical purposes meant only to illustrate net effects that we see But it’s so far off the mark that it’s very misleading First of all for the big investor’s hand to have been tipped a chunk of their order had to have traded Then Scalpers Inc would have to make an educated guess about what the future price impact would be from the unknown remaining order size From there Lewis would have you believe that a sort of ueue jumping would occur Not true The best they could do would be to go to another exchange to see if it’s worth crossing the bidask spread to bet on whether they predicted the big investor’s demand and possible price impact correctly The Scalpers Inc team is at its luckiest when they guess right about the price move and some of the participants uoting at the various exchanges often HFT players themselves hadn’t reacted yet either because they were slow or they disagreed about what the fair price should be In this scenario the big investor is likely to see the market back away from its order meaning that market makers are cancelling the rest of their uotes at that price level Again that’s just a natural reaction to what is now viewed to be a new fair value from the market euilibrium That makes sense but it’s a lot to chew on all at once Can you back up just a skosh to cover how these markets are structured and who does what when where and how?Sure The first thing to understand is that everyone wants to buy low and sell high OK wise guy You do know the meaning of skosh right?Your archaic patois suggests that maybe I should start with intermediaries specialists market makers and bidask spreads As you probably know market intermediaries have served a useful function since the days cavemen were trading mastodon futures Be they human or algorithmic the goal is to provide liuidity by committing to buy at a lower price and sell at a higher price serving as a conduit to facilitate trade Of course it would be easy money if motivated buyers and sellers consistently and in synchrony came along to buy at your higher selling price and sell at your lower buying price However the spread between those two prices has to be big enough to compensate for the times when it’s only sellers coming along; and poor you you’ve bought something falling in price without any buyers to sell your inventory to at the higher price Of course the market maker can be hurt in rising markets too with a short position that’s getting and expensive to buy back The the market makers can do to reduce those risks the willing they are to cut the distance between their buying and selling prices in order to attract extra business Spreads are now razor thin This is a huge benefit for the rest of the market and apparently an underappreciated one For anyone who has made it this far and wants to see the faux FA continues here In it we cover such topics as the trend not being your friend picking up pennies in front of steamrollers whether or not HFT liuidity is a canard Insider Trading 20 and name calling invoking such figures as Marie Antoinette Hitler and Bernie Madoff