Flash Boys Essay
The book Flash Boys tells in detail how the stock exchanges, the large banks, and especially high frequency trading have turned the financial markets into a casino where the house always wins, all in all a huge scam for small and medium investors. High frequency trading is sort of based on the fact that one receives an order one millisecond or two microseconds before or after hitting "enter," and this fact is important. For most institutional or retail traders, this may not be important, but high frequency operators have gigantic computer systems usually placed near the exchange center to reduce latency of orders (Lewis 69). One of the main issues, however, is the difficulty in identifying who the high frequency operators and traders really are.
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At the end of the day, traders formerly in charge of making arbitration, those that used to seek to reward their customers or that provided liquidity to the markets ,for example, have been in many ways overtaken by a technology that can do the same much faster and at a lower price to the investor. It is not surprising that the majority of critics high frequency trading has gathered in the world of Wall Street do not come mainly from investors but from competitors that have become obsolete. Critics, of course, have also good arguments against high frequency trading. Some of them, as described by Brad, include the anticipation of movements from other traders, hindering their operation and costing them money. As Lewis describes it ,it is a legalized front-running. Another argument is that these provide instability in the system, such as creating a possible flash crash. And finally, flash trading or the fact that some exchanges allow high frequency trading to read commands from other participants microseconds before these become public, allowing them to be the very first to
At the end of the day, traders formerly in charge of making arbitration, those that used to seek to reward their customers or that provided liquidity to the markets ,for example, have been in many ways overtaken by a technology that can do the same much faster and at a lower price to the investor. It is not surprising that the majority of critics high frequency trading has gathered in the world of Wall Street do not come mainly from investors but from competitors that have become obsolete. Critics, of course, have also good arguments against high frequency trading. Some of them, as described by Brad, include the anticipation of movements from other traders, hindering their operation and costing them money. As Lewis describes it ,it is a legalized front-running. Another argument is that these provide instability in the system, such as creating a possible flash crash. And finally, flash trading or the fact that some exchanges allow high frequency trading to read commands from other participants microseconds before these become public, allowing them to be the very first to