Flash Boys
A Wall Street Revolt

At (L 465) my characterization is that Brad, our hero, was previously the fast trader, now he is the slow trader. Those who would provide liquidity, as Brad once did, will have to adapt to agents (electronic) who contemplate Brad. We must ask “What is the value of liquidity?”.

For the first time in his career, he felt that he could only win if someone else lost, or, more likely, that someone else could only win if he lost.

This book is ‘a page turner’ and I made so few notes because the book is so absorbing. Lewis writes well and does not leave hanging questions. I suspect that the story could be well told from another perspective where some of the new tech-savvy fast traders were disrupting the ‘corrupt old guard’. I agree with Lewis, however, on identifying Brad as a hero by invoking an old fashioned idea of high quality service with long range goals. Such ideas were rare on Wall Street and I wonder if they were ever there.

Lewis paints many personalities consonant with the execrable characters in the recent movie “The Wolf of Wall Street”.

The fast trading mode which is obvious in retrospect, is for the traders to put in many small buy and sell orders on many exchanges and many stocks. When such an order was taken by someone else the FT (fast trader) would very quickly take the other side of the same stock on the other exchanges. This was certainly equilibrating prices for what that is worth. It was also front-running tuned to perfection. Lewis did not pursue the obvious countermeasures such as entering a market to buy when you really wanted to sell or vice-versa. This is indeed a chess game and play-outs (shoot-outs?) were probably the cause of the flash-crashes.

Brad ultimately prevails to offer a service “IEX” with defined behavior and means for outsiders to verify that that behavior is indeed in place. Sometimes villain Goldman-Sacks had strategic software too complex to play the FT game and threw their lot with IEX.