Flash Boys: A Wall Street Revolt

A millisecond is one thousandth of a second

financial markets had changed, radically, the value of a millisecond.

In August 2013, the Goldman automated trading system generated a bunch of crazy and embarrassing trades that lost Goldman hundreds of millions of dollars (until the public exchanges agreed, amazingly, to cancel them).

Essentially, the more places there were to trade stocks, the greater the opportunity there was for high-frequency traders to interpose themselves between buyers on one exchange and sellers on another

The fragmentation of the American stock market was fueled, in part, by Reg NMS, which had also stimulated a huge amount of stock market trading.

wasn’t the first time that Wall Street people had discredited themselves, but this time the authorities responded by changing the rules—making it easier for computers to do the jobs done by those imperfect peopl

He also lacked the Wall Street trader’s ability to bury his self-doubt, and to seem more important and knowledgeable than he actually was

he knew for sure was that the stock market was no longer a market. It was a collection of small markets scattered across New Jersey and lower Manhattan. When bids and offers for shares sent to these places arrived at precisely the same moment, the markets acted as markets should. If they arrived even a millisecond apart, the market vanished, and all bets were off. Brad knew that he was being front-run—that some other trader was, in effect, noticing his demand for stock on one exchange and buying it on others in anticipation of selling it to him at a higher price. He’d identified a suspect: high-frequency traders. “I had a sense that the problems are being caused by this new participant in the market,” said Brad. “I just didn’t know how they were doing it.”

Why, between the dark pools and the public exchanges, were there nearly sixty different places, most of them in New Jersey, where you could buy any listed stock? Why did the public exchanges fiddle with their own pricing so often—and why did you get paid by one exchange to do exactly the same thing for which another exchange might charge you? How did a firm he’d never heard of—Getco—trade 10 percent of the entire volume of the stock market? How had this guy in the middle of nowhere—in retail in Canada—learned of Getco’s existence before him? Why was the market displayed on Wall Street trading screens an illusion?

That’s when I realized the markets are rigged. And I knew it had to do with the technology