Monday, 5 October 2015

Flash Boys by Michael Lewis Review

Michael Lewis returns to his familiar stomping grounds of Wall Street to report to the rest of the world that, shock, stockbrokers are as corrupt as ever, even after the 2008 crash! 

Flash Boys looks at the phenomenon of high frequency trading and its complex corruption. The image of brokers wearing blazers shouting on trading floors is long defunct with brokers these days staring at computer screens in locked rooms, the trades happening on screens in microseconds. The new dichotomy is that whoever has the tiniest advantage of a fraction of a second’s speed makes the most money. 

It’s a complex book - at least to me, someone who has almost no knowledge of how the stock market works! - though Lewis does his best to explain it to the layman. Basically fibre-optic cable needs to be in as straight a line as possible to achieve the highest speeds so a line was built between New York and Chicago that was exactly that, giving those firms who used it the advantage of a few fractions of a second, translating into billions in profit every year. 

The system is that someone places an order to buy shares at a price, the high frequency trader intercepts the order and buys shares at a slightly cheaper price, completing the order and pocketing the difference, usually a penny or so on the dollar - but these numerous micro-transactions adds up tremendously. And it’s kinda illegal, especially once “dark pools” were created - private stock markets where the buyer doesn’t see what the brokers are up to and no records are kept, making the skimming easier to do. 

Lewis’ protagonist, so to speak, is Brad Katsuyama, a broker at Royal Bank of Canada (eh?), who saw the unfairness of this system and sought to redress the balance with a new model stock market called IEX. His new model was designed to make things more fair, more transparent, while also making the market more stable to avoid crashes like in 2008. 

It’s inspiring that guys like Katsuyama would try something like this especially as many people have the idea of Wall Street being a place of unrepentant greed, ego and corruption - which it largely is. Goldman Sachs once again comes off looking like the biggest, sleaziest, most evil collection of fucks in the world, the kind of human garbage which make atheists like me wish there really is a hell for them to burn in for eternity. But it looks like IEX worked and Katsuyama made a real difference. 

I usually enjoy Lewis’ books as he takes on some major topics and makes them accessible and interesting, like in The Big Short (about the 2008 crash) and Boomerang (the aftermath of said crash) - both highly recommended by the way. 

Unfortunately Flash Boys, while a logical next step in documenting the financial chaos of our times, was a bit too esoteric for me. It felt overly complex particularly as I’m not especially interested in the stock market and have no dealings with stocks/shares anyway, so it seemed a bit irrelevant from my perspective. As a result it also seemed overlong and more than a bit boring. I zoned out quite a bit even though I tried my best to get a handle on the subject.

I think readers who would enjoy Flash Boys should be very interested in finance and the stock market, beyond the level of the dilettante. Still, I applaud Lewis’ efforts to keep the masses informed on the nitty gritty shittiness that Wall Street keep trying to get away with. Flash Boys wasn’t a book that spoke to me very deeply but I’m glad there are guys like Michael Lewis and Brad Katsuyama out there, using their wits and skills to keep fuckers like Goldman Sachs in line.

Flash Boys

No comments:

Post a Comment