Moneyball Author: US Stock Market Is Rigged

High-frequency trading enables big players to fix prices: Michael Lewis

By Neal Colgrass,  Newser Staff

Posted Mar 31, 2014 2:15 PM CDT
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(Newser) – The fix is in on Wall Street, and high-speed trading firms are reaping the rewards—at least according to Moneyball author Michael Lewis. Pitching his new book, Flash Boys: A Wall Street in Revolt, Lewis tells 60 Minutes that big firms beat smaller companies to the punch by thousandths or even millionths of a second with sophisticated computer software, Reuters reports. The firms "are able to identify your desire to buy shares in Microsoft and buy them in front of you and sell them back to you at a higher price," he says. How so? Via high-frequency trading (HFT), a practice involving gobs of simultaneous orders submitted at amazing speeds.

Lewis based his book on Brad Katsuyama, a Canadian trader who discovered that his stock orders were visible to big trading firms—which rapidly bought up lots of shares and sold them to his bank at a higher price. So Katsuyama started IEX, a company that successfully shopped new software around Wall Street to prevent smaller equity-market players from getting bilked. Some firms are trying to destroy IEX, CBS News reports, but New York Attorney General Eric Schneiderman is meeting with US exchanges to discuss reforms. Advocates say HFT brings liquidity to markets, Bloomberg reports, but Barry Ritholz writes at Bloomberg View that "their claims of added liquidity laughable. They are the centerpiece of a flawed system without any socially redeeming qualities." Click to see Lewis on 60 Minutes.

Trader Greg Mulligan, center, works on the floor of the New York Stock Exchange, Tuesday, March 25, 2014.
Trader Greg Mulligan, center, works on the floor of the New York Stock Exchange, Tuesday, March 25, 2014.   (AP Photo/Richard Drew)
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