Suppose you are a small investor and you decide to place an order online to buy a thousand shares of a stock. You have researched the stock carefully and you are planning on holding it for the foreseeable future. You press the send button on your iPad and your order goes to your broker. The broker then becomes obligated to place your order and buy it at the lowest price being offered on as many as fifty stock exchanges and “dark pools,” essentially private exchanges operated by banks and brokerages.
Unknown to you, your broker has sold its stream of orders to a High Frequency Trader (“HFT”)who intercepts your order and buys up the 1000 shares you want at one price and sells it to you for five cents a share higher than it was available less than a second earlier. Your broker, who has sold the information stream to a HFT, has just cost you $50 and you have no idea. Repeat this process millions of times an hour, and pretty soon the real effects become clear. Investors are being cheated out of billions of dollars and don't even know it because the cheating takes place in a tenth of the time it takes to blink your eye.
How sucessful is HFT? These firms all close out their accounts at the end of each day. Some HFTs have never sustained a loss in any trading day.
Flash Boys is the story of the systematic fixing of stock exchanges world wide by HFTs, brokerages, banks and regulators. It happened largely because the urge to game a system accelerates in direct proportion to the possibility of detection. What this possibility so low is because of speed of transactions and the complicity, both claculated and inadvertent, of the governmental regulators and so-called institutional fiduciaries in the looting. If industry watchdogs are willing to help you steal, you are going to continue stealing.
This is also the story of how a few Wall Street D-Listers mainly from the Royal Bank of Canada New York trading office set out to understand why the market was acting strangely. The result was the creation of a new stock exchange transparent in its operation which is technologically and morally resistant to these kind of manipulations.
As a lawyer, I can assure you that there will be litigation. Michael Lewis has opened the curtain on the Wizards of Wall Street in this most important book.
Unknown to you, your broker has sold its stream of orders to a High Frequency Trader (“HFT”)who intercepts your order and buys up the 1000 shares you want at one price and sells it to you for five cents a share higher than it was available less than a second earlier. Your broker, who has sold the information stream to a HFT, has just cost you $50 and you have no idea. Repeat this process millions of times an hour, and pretty soon the real effects become clear. Investors are being cheated out of billions of dollars and don't even know it because the cheating takes place in a tenth of the time it takes to blink your eye.
How sucessful is HFT? These firms all close out their accounts at the end of each day. Some HFTs have never sustained a loss in any trading day.
Flash Boys is the story of the systematic fixing of stock exchanges world wide by HFTs, brokerages, banks and regulators. It happened largely because the urge to game a system accelerates in direct proportion to the possibility of detection. What this possibility so low is because of speed of transactions and the complicity, both claculated and inadvertent, of the governmental regulators and so-called institutional fiduciaries in the looting. If industry watchdogs are willing to help you steal, you are going to continue stealing.
This is also the story of how a few Wall Street D-Listers mainly from the Royal Bank of Canada New York trading office set out to understand why the market was acting strangely. The result was the creation of a new stock exchange transparent in its operation which is technologically and morally resistant to these kind of manipulations.
As a lawyer, I can assure you that there will be litigation. Michael Lewis has opened the curtain on the Wizards of Wall Street in this most important book.
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