Flash Boys" (Book): Computer Trading & Stock Market Insight

[Stephen Tashi]

For those interested in computer technology and the stock market, I recommend the interesting book "Flash Boys" by Michael Lewis. It describes some significant anti-free market aspects of "computer trading".

 

[jedishrfu]

That looks like a cool book:

https://www.amazon.com/dp/0393351599/?tag=pfamazon01-20

Another book I liked was Fortunes Formula:

https://www.amazon.com/dp/0809045990/?tag=pfamazon01-20

 

[Stephen Tashi]

Another book I liked was Fortunes Formula:

https://www.amazon.com/dp/0809045990/?tag=pfamazon01-20

Yes, "Fortunes Formula" is an interesting book. The themes of the book aren't as unified as the publisher's advertising suggests, but who expects publishers advertising to be accurate.

 

[jedishrfu]

There was a great documentary a few years ago on PBS I think American Experience or Nova about the Black Sholes equation and the notion of zero risk by using it to balance the ups and downs of the stock market and the dangerous assumption that undermined it. Might be on youtube simewhere.

 

[Hornbein]

There was a great documentary a few years ago on PBS I think American Experience or Nova about the Black Sholes equation and the notion of zero risk by using it to balance the ups and downs of the stock market and the dangerous assumption that undermined it. Might be on youtube simewhere.

Yah. I think that these hedging schemes are the financial equivalent of perpetual motion machines.

 

[jedishrfu]

Thats what happened they assumed a stable market but a Tokyo realestate bubble burst and things started to quickly derail. The Fed had to step in and bailout things before everything crashed.

 

[Astronuc]

There was a great documentary a few years ago on PBS I think American Experience or Nova about the Black Sholes equation and the notion of zero risk by using it to balance the ups and downs of the stock market and the dangerous assumption that undermined it. Might be on youtube simewhere.

I think this is it - http://www.pbs.org/wgbh/nova/stockmarket/, or http://www.pbs.org/wgbh/nova/stockmarket/formula.html

It would be interesting to see the program - but transcript is here - http://www.pbs.org/wgbh/nova/transcripts/2704stockmarket.html

For those interested in computer technology and the stock market, I recommend the interesting book "Flash Boys" by Michael Lewis. It describes some significant anti-free market aspects of "computer trading".

It is a fascinating story, especially the parts about the impact of the inherent latency in communications technology that one could exploit, and the dark pools, in which one's investment company may be putting one at a disadvantage.

Michael Lewis Reflects on His Book Flash Boys, a Year After It Shook Wall Street to Its Core (March 2015)
http://www.vanityfair.com/news/2015/03/michael-lewis-flash-boys-one-year-later

On the book’s publication day, for instance, an analyst inside a big bank circulated an idiotic memo to clients that claimed I had “an undisclosed stake in IEX.” (I’ve never had a stake in IEX.) Then came an unfortunate episode on CNBC, during which Brad Katsuyama was verbally assaulted by the president of the BATS exchange, who wanted the audience to believe that Katsuyama had dug up dirt on the other stock exchanges simply to promote his own, and that he should feel ashamed. He hollered and ranted and waved and in general made such an unusual public display of his inner life that half of Wall Street came to a halt, transfixed. I was told by a CNBC producer that it was the most watched segment in the channel’s history, and while I have no idea if that’s true, or how anyone would even know, it might as well be.

and

A defining moment came when Katsuyama asked him [the president of BATS] a simple question: Did BATS sell a faster picture of the stock market to high-frequency traders while using a slower picture to price the trades of investors? That is, did it allow high-frequency traders, who knew current market prices, to trade unfairly against investors at old prices? The BATS president said it didn’t, which surprised me. On the other hand, he didn’t look happy to have been asked. Two days later it was clear why: it wasn’t true. The New York attorney general had called the BATS exchange to let them know it was a problem when its president went on TV and got it wrong about this very important aspect of its business. BATS issued a correction and, four months later, parted ways with its president.

Looks like I may have to read -
Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market, by Scott Patterson
https://www.amazon.com/dp/0307887189/?tag=pfamazon01-20 (no endorsement expressed or implied)

 

[Stephen Tashi]

An article about some old time high speed traders: http://www.moaf.org/publications-co...111/_res/id=sa_File1/Plundered_by_Harpies.pdf

 

[Astronuc]

Where is IEX today.
http://www.bbc.com/news/business-36544970

With "all the criticism of IEX, earlier this month the US regulator, the Securities and Exchange Commission, approved it becoming the 13th stock exchange in the US."