Who would have thought going digital would have allowed stock market traders more opportunities to scam the investors? In Flash Boys, Michael Lewis manages to explain how High Frequency Traders (HFT) used the advantage of speed to basically conduct a form of insider trading, and make billions off US Stock Market trades.
There were a couple of things that really struck me about this story. First, it was fascinating that the majority of the traders had no idea how the technology worked or how it could benefit or hurt them and their clients. Second, when many in the banking houses found out about the scam, they were actually outraged, but by this time, the HFT had incentivized making their dark pools available to them, and they couldn’t see that giving up those profits would actually be better off for them in the long run. Third was the impact of government on these scams. The reason HFT were able to scam the system was because of SEC regulations. At one point, Lewis shows how each regulation was put in place to solve the corruption caused by a previous regulation, and this went all the way back to the 1800’s. Fourth, it was fairly obvious how self-regulating was far better for the financial houses because they could easily fix the problems themselves, and also because they had more eyes to point out the problems. Today, most of the scammers were actually former government employees, who felt it was their right to go out and make millions on Wall Street after doing their government stint. They had no loyalty to the banking houses and no loyalty to their customers. And since their friends were the government cronies still at the SEC, nothing was likely to change, since they preferred to keep a system that would benefit themselves in the long run.
Even if you thought a book about finance and technology couldn’t possibly interest you, let me assure you that Michael Lewis presents this narrative better than most nail-biting crime novels. I felt like I was suffering from Flash Boys addiction while reading this. I was so absorbed in this page-turner, I would get upset when I had to put it down. Needless to say, my family had to eat out a few times while I was reading, because there was no way I was going to put it down to make dinner. This was a fantastic work of non-fiction. I definitely plan on reading more by this author!
5 stars (out of 5)
Published in 2015
Amazon Book Preview of Flash Boys