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Alternative Market Briefing

The Flash Boys flash mob

Friday, April 11, 2014

Bailey McCann, Opalesque New York:

Michael Lewis' new book Flash Boys released last week to great fanfare, and some very real investigations into market activity. In the book, Lewis blends two of his familiar plot lines wall street and plucky idealism. Lewis, former creature of the trading floor returns anew to find the state of play altered by computers and the young traders who run them, and he doesn't like what he sees. This time, the can-do idealist who beats the establishment is a former RBC trader who starts his own exchange after discovering the evils of high frequency traders. The book is not quite Moneyball or Liar's Poker, but it has sparked some new investigations into market structure.

Whether you like or hate high frequency traders, or believe they provide liquidity, the resulting Flash Boys flash mob investigations should probably trouble you. For starters, high frequency trading isn't all that new, nor is it new to regulators. What is new is the opportunity to scapegoat new parts of the market, thanks to the cover afforded by Lewis' book.

The game is rigged, maybe not in the over simplified David v. Goliath way explained in Flash Boys but front-running exists, QE exists, artificial scarcity exists, and pretending it doesn't to keep more greater fools in the game is only a short-term strategy. Watching hedge funds unwind the most fa......................

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