Author Topic: Flash Boys - Michael Lewis  (Read 17718 times)

Grenville

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Re: Flash Boys - Michael Lewis
« Reply #10 on: April 09, 2014, 04:23:49 PM »
It is worth it. By about 2/3 through it, it becomes very clear what the problem with HFT is, where they describe the HFT strategies but also how exchanges works behind the scenes, will all kinds of hidden staircases and trapdoors that most people don't know exist (brokers selling their own customers' info to HFT firms so they can be front-run; 150 different order types, some described by 20 pages of inscrutable legalese, with no obvious purpose except to allow a HFTer to not do the trade that he publicly appears to want to do or to get a kickback without providing the liquidity that the kickback is supposed to incentivize? yeah, that's just random luck that all that stuff is there and that the exchanges make most of their profit from HFT..).

Interesting! Hopefully all that information will lead to real changes at the exchanges or a push by customers to places like IEX.


Liberty

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Re: Flash Boys - Michael Lewis
« Reply #11 on: April 09, 2014, 04:55:41 PM »
Interesting! Hopefully all that information will lead to real changes at the exchanges or a push by customers to places like IEX.

That's what I'm thinking. This kind of stuff hasn't been around that long (there was a legal change around 2006 that made a lot of this possible), and probably won't be around that long now that there's more of a spotlight on it.

Note that this is different from the legit kind of HFT, which even IEX wants to encourage. You're a market maker or trying to react really fast to information? That's fine for the long term. But exchanges  and banks (dark pools, etc) and HFT working hand-in-hand to create a rigged game, that's probably going to see the pendulum swing in the other direction sooner than later.
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50centdollars

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Re: Flash Boys - Michael Lewis
« Reply #12 on: April 09, 2014, 04:56:27 PM »
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50centdollars

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Re: Flash Boys - Michael Lewis
« Reply #14 on: April 11, 2014, 08:51:35 PM »
People are pist because they know things are going to change. Look at how the president of the BATS exchanged acted last week.
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Liberty

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Re: Flash Boys - Michael Lewis
« Reply #15 on: April 12, 2014, 08:44:30 AM »
People are pist because they know things are going to change. Look at how the president of the BATS exchanged acted last week.

I think people are starting to realize that it doesn't just affect rich people. The narrative is starting to mention more that "big money" is actually regular Joe's pension fund and mutual fund, and that people managing their money are complicit in them getting skimmed and the people supposed to represent them are making a lot of money from it (via their prop trading, dark pools, fees from HFT). That's what creating more outrage on top of the abstract injustice of it.
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OracleofCarolina

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Re: Flash Boys - Michael Lewis
« Reply #17 on: April 20, 2014, 12:54:44 PM »
http://www.valuewalk.com/2014/04/michael-lewis-malcolm-gladwell/

Interesting conversation between malcolm gladwell and michael lewis.

ItsAValueTrap

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Re: Flash Boys - Michael Lewis
« Reply #18 on: April 20, 2014, 09:16:50 PM »
Just finished reading the book.

1- I learned some things about HFT that I had no clue about.  It did not occur to me that HFTs would abuse special order types and that there is publicly-available information about these order types.

2- There are some technical errors in the book.  Lewis confuses taking liquidity with providing liquidity at one point in the book.  He gives an example of a trade happening at $30.0001... he says that the the investor bought at that price when he meant to say that the investor sold at that price.
I suppose that Lewis is trying to simplify a very complicated subject. 

3- Lewis praises IEX as being the solution.  However, IEX seems like it has some holes in it (which they may eventually fix).  The book even gives an example where a HFT arbitrages dark pool pricing versus IEX's midpoint pricing.

The midpoint order seems kinda derpy to me.  In the example given in the book, the client should have placed a limit order instead at the midpoint.  In an ideal world, regulators would allow all investors to price in sub-penny increments.  They would have a solution to "shaving".  Ebay for example has a solution to shaving.  On Ebay, you can bid in penny increments.  However, you need to top the highest bid by a certain amount (e.g. 25 cents or some percentage; I forget the exact number).  If you don't, then the highest bidder will still have the highest bid.  You can't beat a $1000.00 bid with a $1000.01 bid.
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Liberty

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Re: Flash Boys - Michael Lewis
« Reply #19 on: April 21, 2014, 07:38:53 AM »
2- There are some technical errors in the book.  Lewis confuses taking liquidity with providing liquidity at one point in the book.  He gives an example of a trade happening at $30.0001... he says that the the investor bought at that price when he meant to say that the investor sold at that price.
I suppose that Lewis is trying to simplify a very complicated subject. 

He mentioned in an interview that there were some errors that would be fixed in the next edition, but that they didn't detract from the overall point. He said that it's impossible to publish 100,000 words and not have people find some errors.

It's just funny that some people on the financial news media attacked him with the good old subtext of: "Ha! See! There's an error here, hence the whole book is null and void."
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