Lit Lawvers discussion

Michael Lewis is one of the best financial writers. He's able to explain complicated financial markets and tell a good story at the same time. I'm looking forward to reading this.

I have seen him interviewed on several TV shows and am also looking forward to reading this. I wish more Americans would become more educated regarding big banksters and all their questionable ethical choices and what I feel is a terrible tendency towards greed.

so i've grabbed Flash Boys: A Wall Street Revolt and devoured chapter 1. engaging, makes me want to keep on reading. . .

Michael Lewis is one of the best business writers. If you wondered what high speed trading was all about, he lets you know.

Questions for the group:

1. Did you understand high speed trading before reading the book?

2. Do you better understand it after reading the book (or did it just confuse you more?)

Since this group is full of lawyers and law students, should high-speed trading be illegal?

my answer for #1 and #2 above:

1. I had only a basic idea of what HST was before reading the book.

2. Reading Flash Boys gave me a much deeper understanding of HFT. It AMAZED me that Brad had to search so broadly before he found others who truly understood the "how" of the technology.

Legal/Illegal:
If HST was outlawed, then how far back, technologically, do you suppose the market would reach to find consensus on fair trading practices, assuming they were to outlaw on the grounds of unfairness?

I think a big part of the problem with HFT is that few people understand it, including the regulators. Those that do are too busy making money to point out the problems.

I'm not sure I understand it enough to look toward regulatory fixes. I think the low-hanging fruit is banning some of the order types. The hide and slide seems like it has not real use other than to elicit trade information for front-running on other exchanges.

I just finished the book and loved it. I was clueless with regards to HFT before reading this book, and now I have a solid grasp of the subject (although I am by no means an expert). I do think HFT should be illegal, because I consider it a form of insider trading. "Speed traders" are essentially getting access to data before others (even if only by a few microseconds), and using that information to profit at the expense of others. Maybe HFT does bring some benefits to the market, but none that I am aware of yet. The market should be structured to benefit common investors--not the shadowy HFT firms.

High frequency trading itself is not inherently illegal or even unethical. Speed has always been a factor in trading success. The faster you can get information and can successfully act on the information, the more likely you are to have trading success.

I think Mr. Lewis confuses some of those topics. The high-speed line he describes in the book is in place to exploit the pricing differences between options traded in Chicago and the nominal securities traded in NY/NJ. Those get out of sync between the two markets and you can make money by trading before they get back in alignment. In that case the trades are for two different things.

I find that very different than the front-running type activity that Brad discovered in the book. Brad was trying to trade the same thing, but the market was reacting to his order faster than he could trade the order. I think the problem is somehow inherent in the physical structure of having multiple markets for the stocks.

http://www.bloombergview.com/articles...

interesting article in which Brad is playing defense. reading the comments there reminds me that i don't even have a solid grasp of HFT and really should not trick myself into feeling that i do after reading only this book.

one commenter wrote, "they are front running in the spirit of the law," and there seems to be a big debate on whether they are front running or not.

"exchanges are private and make their own rules" capitalism, right? so essentially, i can choose where i want to invest my money, if my broker is honest and transparent with me, assuming the exchange is honest and transparent with the broker. honesty and transparency all the way up and down the line is what, i'm afraid, we do not have in our financial system.

personally, i invest in self-directed IRAs and p2p lending. an employer (100% employer choice) sticks $ in a troweprice account for me. my only choice there was to select the fund with the lowest expense ratio, so those big boys make as little as possible off of my very hard earned dollars.

i'm not too fond of big black boxes, and i feel that is essentially what wall street is to average americans.

Julie - I think you are missing something. You may not be investing directly in stocks and paying the HFT price directly. But the fund you invest in is trading stocks and is battling against the trading activity of predatory HFTs. That translates to more cost for your mutual fund and a poorer return for your retirement. So the predatory HFT is getting your hard-earned dollars indirectly.

yes, i realize the troweprice fund most likely does have frequent interaction with HFTs. however, until i become vested, that employer-contributed money can't be moved outside of troweprice, so i have no choice.

but the good news is that i can choose other options for my personally controlled retirement savings elsewhere. that tiny amount of $ at troweprice is my only contact with the wall street stocks.

however, it angers me that wall street is really screwing the average joe investors like us.

One thing I found different about this book compared to other Michael Lewis books is the lack of resolution. We're just left with High-speed trading and no answer to the problem.

To answer Doug's questions, I understood nothing about it until I started reading and I found it was helping me understand but I found it almost unbelievable or something Ozzie I had no knowledge of the fibre pipeline that was built at great expense and then used to gain advantage. my hubby used to work in IT for big finance company in Sydney and he is a maths wiz so he understands derivatives and fibre tech etc and I would read a bit, be in shock and then ask him: did u know about this and is this right etc
I had watched a very interesting interview with an ex derivatives modeller from wall st and this didn't mention any of this stuff and he is now an underground media political activist who streams conflict sites eg Egypt etc etc
this book blows my mind

Does anyone else know about Chris Hedges in USA, is he known widely in academic circles, books include Death of the Liberal Class and online articles include Lets Get This Class War Started?

Flash Boys: A Wall Street Revolt made it into the first round of Good Reads Choice Awards for 2014.

https://www.goodreads.com/choiceaward...