It is not that the new stock market HAS done away with Intermediaries Entirely. Take brokers, for example. Brokers are still used by investors to help 'em wide move off chunks of stock Where the market May not be reliable to fill the order immediately All. Take Some brokers The risk in this action and Provide liquidity in doing so, since They help move capital to icts Most Useful rentals, THUS and brokers still Provide a Very useful service.
While brokers-have always Existed, the new stock market HAS aussi added a new breed of intermediary. This new breed of intermediary is Known As the high frequency traders (HFT). The high frequency trader Operates on speed, location and Relying on advanced communications technology to learn about the movement of the market before others, and uses this knowledge to make winning trades.
To give you an indication of how significant high frequency trading HAS Become, at least Consider That half of the trades being white now made in the United States are coming from high frequency traders.
Those Who defends high frequency trading thesis argues That Actually quick trades help move money through the stock market, and THUS add liquidity to the system (the way brokers do); and That, The Therefore, high frequency traders Provide a valuable service.
HOWEVER, just how high frequency trading works HAS Remained Largely a mystery to anyone outside of the industry Itself; And many Concerned That Have Become high frequency trading is not so much a contributor liquidity-as-a way of money off of scalping trades That Would Have Happened anyway.
In 'Flash Boys: A Wall Street Revolt', Michael Lewis Follows one man Who made it His Mission to find out What Was going on at the heart of HFT. That man is one Brad Katsuyama, a broker from the sleepy Canadian bank RBC.
Katsuyamas interest in the mystery Began back in 2007, When He found que la trades He Was Trying to make from His desk at RBC Were not being white Executed in the Way They once had. In short, being white Katsuyama Was ripped off. And thats not all. Katsuyama soon found That Other brokers Were aussi being white ripped offand Even the investment firms being white Were ripped off. And since the investment firms manage your money and mine, We Were being white ripped off too !! This Was big.
Katsuyamas dogged persistence led _him_ Eventually (and a growing band of fellow mystery-solvers) to Find That It was Indeed the high frequency traders Who Were ripping _him_ (and everyone else) off (though the HFTs Were not the only Culprits Involved). Whats more, Katsuyamas team aussi Discovered just how the HFTs Were doing it. The long and the short of it is que la HFTs are just the gaming technology. And in a way That Is not only ripping off others, goal making the system more volatile and prone to errors and disasters as well (witness the flash crash of May 6, 2010).
Rather than Deciding to join the HFTs at the trough (Which would-have-been easy enough to do), and his team Katsuyama Decided to fix things. SPECIFICALLY, the team Decided to start Their Own stock exchange: a stock exchange (called Expired the IEX) That Was designed to be immune to advantages in technology, and hence Fundamentally fair to all (It was gold That Either wait around for the SEC to do somethingwhich May take forever).
Now, You Would Think That That Is a stock exchange fair to all Fundamentally Would Be a big hit. Goal then again, a whole heck of a lot of people-have no interest in making things fair to all. Which side will win? The fate of the IEX (ouvert qui in October of 2013) To be determined HAS yet ...
This book is fantastic. The story will confirm your suspicious That truth is stranger than fiction. Lewis writes beautifully, unpretentiously, and Makes the characters jump right off the page (that wouldnt-have beens That difficulty herethese Some are brilliant characters). My only objection Is That Lewis Explanations of the technical side of things, while very good, occasionally Could Have beens Slightly more clear. Still, an enlightening and wonderful read.
