Flash Boys

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Flash Boys

by Michael Lewis

WW Norton | March 31, 2014 | Hardcover

Flash Boys is rated 4.6667 out of 5 by 3.

Four years after his #1 bestseller The Big Short, Michael Lewis returns to Wall Street to report on a high-tech predator stalking the equity markets.

Flash Boys is about a small group of Wall Street guys who figure out that the U.S. stock market has been rigged for the benefit of insiders and that, post–financial crisis, the markets have become not more free but less, and more controlled by the big Wall Street banks. Working at different firms, they come to this realization separately; but after they discover one another, the flash boys band together and set out to reform the financial markets. This they do by creating an exchange in which high-frequency trading—source of the most intractable problems—will have no advantage whatsoever.

The characters in Flash Boys are fabulous, each completely different from what you think of when you think “Wall Street guy.” Several have walked away from jobs in the financial sector that paid them millions of dollars a year. From their new vantage point they investigate the big banks, the world’s stock exchanges, and high-frequency trading firms as they have never been investigated, and expose the many strange new ways that Wall Street generates profits.

The light that Lewis shines into the darkest corners of the financial world may not be good for your blood pressure, because if you have any contact with the market, even a retirement account, this story is happening to you. But in the end, Flash Boys is an uplifting read. Here are people who have somehow preserved a moral sense in an environment where you don’t get paid for that; they have perceived an institutionalized injustice and are willing to go to war to fix it.

Format: Hardcover

Dimensions: 304 pages, 9.5 × 6.6 × 1 in

Published: March 31, 2014

Publisher: WW Norton

Language: English

The following ISBNs are associated with this title:

ISBN - 10: 0393244660

ISBN - 13: 9780393244663

Found in: Business and Finance

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Reviews

Rated 4 out of 5 by from Fascinating tale, well documented, although at times difficult I found this book well researched, very well written and fascinating. What we all may have suspected about Wall Street is more than true and the intrigue and dynamics are documented precisely in Lewis's book. However, at times, it is difficult to follow. If you are not well-versed in the stock trade you may find yourself checking things here and there. Still, it is a book to be read. I actually bought the book on a trip and after reading the jacket thought it was a novel! Once I realized this is reality it almost becomes unbelievable at times.
Date published: 2014-06-01
Rated 5 out of 5 by from A Brief Summary and Review *A full executive summary of this book is available on Chapter's here: http://www.chapters.indigo.ca/books/an-executive-summary-of-michael/9990044504972-item.html?ikwid=flash+boys&ikwsec=Home&ikwidx=3 The thrust: Over the past 20 years, and particularly in the past decade, the stock market has undergone some significant changes. The most visible change is that much of the action has now become computerized. For example, whereas stock markets used to consist of trading floors (pits), where floor traders swapped stocks back and forth, we now have computer servers where sellers and buyers are connected automatically. Now, on the one hand, this automation has led to some substantial efficiencies, as once necessary financial intermediaries have now largely become obsolete (this has led to savings not only because the old intermediaries earned an honest commission for their dealings, but because their privileged position sometimes led to corruption). It is not that the new stock market has done away with intermediaries entirely. Take brokers, for example. Brokers are still used by large investors to help them move large chunks of stock where the market may not be able to fill the order immediately. The brokers take some risk in this action, and provide liquidity in doing so, since they help move capital to its most useful location, and thus brokers still provide a very useful service. While brokers have always existed, the new stock market has also added a new breed of intermediary. This new breed of intermediary is known as the high frequency trader (HFT). The high frequency trader operates on speed, relying on location and advanced communications technology to learn about the movement of the market before others, and uses this knowledge to make winning trades. To give you an indication of how important high frequency trading has become, consider that at least half of the trades now being made in the United States are coming from high frequency traders. Those who defend high frequency trading argue that these quick trades actually help move money through the stock market, and thus add liquidity to the system (the way brokers do); and that, therefore, high frequency traders provide a valuable service. However, just how high frequency trading works has largely remained a mystery to anyone outside of the industry itself; and many have become concerned that high frequency trading is not so much a liquidity-contributor as a way of scalping money off of trades that would have happened anyway. In 'Flash Boys: A Wall Street Revolt', Michael Lewis follows one man who made it his mission to find out what was going on at the heart of HFT. That man is one Brad Katsuyama, a broker from the sleepy Canadian bank RBC. Katsuyama’s interest in the mystery began back in 2007, when he found that the trades he was trying to make from his desk at RBC were not being executed in the way they once had. In short, Katsuyama was being ripped off. And that’s not all. Katsuyama soon found that other brokers were also being ripped off—and even the investment firms were being ripped off. And since the investment firms manage your money and mine, we were being ripped off too!! This was big. Katsuyama’s dogged persistence eventually led him (and a growing band of fellow mystery-solvers) to find that it was indeed the high frequency traders who were ripping him (and everyone else) off (though the HFTs were not the only culprits involved). What’s more, Katsuyama’s team also discovered just how the HFTs were doing it. The long and the short of it is that the HFTs are just gaming the technology. And in a way that is not only ripping others off, but making the system more volatile, and prone to errors and disasters as well (witness the flash crash of May 6, 2010). Rather than deciding to join the HFTs at the trough (which would have been easy enough to do), Katsuyama and his team decided to fix things. Specifically, the team decided to start their own stock exchange: a stock exchange (called the IEX) that was designed to be immune to advantages in technology, and hence fundamentally fair to all (it was either that or wait around for the SEC to do something—which may take forever). Now, you would think that a stock exchange that is fundamentally fair to all would be a big hit. But then again, a whole heck of a lot of people have no interest in making things fair to all. Which side will win? The fate of the IEX (which opened in October of 2013) has yet to be determined... This book is fantastic. The story will confirm your suspicious that truth is stranger than fiction. Lewis writes beautifully, unpretentiously, and makes the characters jump right off the page (that wouldn’t have been that difficult here—these are some brilliant characters). My only objection is that Lewis’ explanations of the technical side of things, while very good, could have occasionally been slightly more clear. Still, an enlightening and wonderful read. A full executive summary of the book is available on Chapter's here: http://www.chapters.indigo.ca/books/an-executive-summary-of-michael/9990044504972-item.html?ikwid=flash+boys&ikwsec=Home&ikwidx=3
Date published: 2014-04-18
Rated 5 out of 5 by from Outstanding Book by the Leading Financial Author In his first book, Liar’s Poker, Michael Lewis sketched colourful and entertaining characters to show us the excesses of a Wall Street titan - Salomon Brothers - at the peak of its game.  Later, in The Big Short, he used his considerable storytelling abilities and yet more colourful and entertaining characters to help explain the financial collapse of 2007.  With his latest book, Flash Boys: A Wall Street Revolt, Lewis again weaves a compelling story with still more wonderful characters, but rather than chronicling a market excess or explaining post hoc a financial crisis, this time Lewis investigates, uncovers and reports on systematic Wall Street shenanigans by a small group of High Frequency Traders (HFT), their complicit and enabling stock exchanges and the perverse regulations that permit or encourage the activity.   While the book is enjoyable and entertaining to read, what Lewis reports will anger and sadden most readers, for it becomes very clear as the book progresses how enormously the odds are stacked against retail investors.  In the beginning even “the most sophisticated investors didn’t know what was going on in their own market.  Not the big mutual funds, Fidelity and Vanguard.  Not the big money management firms like T. Rowe Price and Janus Capital.  Not even the most sophisticated hedge funds.” Flash Boys engages readers immediately with a story; the laying of a new and secret fibre optic cable between New Jersey and Chicago.  The cable’s sole purpose is to be straighter, and therefore shorter and faster, than the existing phone company links used by futures traders.  Time is money, and the prohibitively high cost for the new fibre line is more than offset by the financial advantage (via an edge in trade execution) to the few firms who lease the line. From this Lewis shifts to the integrity of programmed and algorithmic trading, then on to dark pools and several other trading strategies.  Readers should not be put off by the industry jargon or the esoteric corner of finance that Mr. Lewis exposes.  Each concept is introduced in turn and in the most concise and entertaining way possible.  As both a liberal arts major and a former Wall Street insider, Lewis bests all other financial authors in taking complex issues and distilling them into memorable and understandable passages. It seems no exposé of Wall Street’s shortcomings is complete without an appearance by Goldman Sachs, and Lewis doesn’t disappoint.  Goldman’s role, however, is modest.  First, like all of the major investment banks, they employ ‘dark pools’ where clients can trade anonymously and ostensibly for better execution, but where either the investment bank or, for a fee, an HFT firm will game the system to deliver poorer execution.  The difference between good and poor execution is a small profit to the bank or HFT firm, repeated millions of times per day.   Second, Goldman saw the profit in speedier execution and HFT, and to this end hired a Russian born computer programmer.  While the programmer delivered, Goldman’s systems were built atop years of antiquated and bloated code, and they never did realize the profits of smaller, sleeker HFT firms with new coding.  In any case, the Russian left Goldman and was subsequently convicted of stealing trade secrets.  Just as Bob Dylan sang about Hurricane Carter, Lewis waxes poetic about the injustice, the ineptitude of investigators, and perverseness of Goldman’s position in the matter. The heroes of the book are Canadians: the Royal Bank of Canada in general, and Brad Katsuyama in particular.  Of RBC, their ‘nice guy’ image, and their desire to enter Wall Street, Lewis says “It was as if the Canadians had summoned the nerve to audition for a role in the school play, then turned up wearing a carrot costume.”  An inauspicious start to RBC’s Wall Street push, but a perfect setup to Katsuyama’s role in exposing the HFT inequities and eventually setting up his own rival stock exchange where retail investors cannot be fleeced.   Forty years after Bernstein and Woodward’s investigative journalism changed the American political landscape, perhaps Lewis’ sleuthing will foment change in capital market structure.  An excellent book by a master at the top of his game.
Date published: 2014-04-01

– More About This Product –

Flash Boys

by Michael Lewis

Format: Hardcover

Dimensions: 304 pages, 9.5 × 6.6 × 1 in

Published: March 31, 2014

Publisher: WW Norton

Language: English

The following ISBNs are associated with this title:

ISBN - 10: 0393244660

ISBN - 13: 9780393244663

From the Publisher

Four years after his #1 bestseller The Big Short, Michael Lewis returns to Wall Street to report on a high-tech predator stalking the equity markets.

Flash Boys is about a small group of Wall Street guys who figure out that the U.S. stock market has been rigged for the benefit of insiders and that, post–financial crisis, the markets have become not more free but less, and more controlled by the big Wall Street banks. Working at different firms, they come to this realization separately; but after they discover one another, the flash boys band together and set out to reform the financial markets. This they do by creating an exchange in which high-frequency trading—source of the most intractable problems—will have no advantage whatsoever.

The characters in Flash Boys are fabulous, each completely different from what you think of when you think “Wall Street guy.” Several have walked away from jobs in the financial sector that paid them millions of dollars a year. From their new vantage point they investigate the big banks, the world’s stock exchanges, and high-frequency trading firms as they have never been investigated, and expose the many strange new ways that Wall Street generates profits.

The light that Lewis shines into the darkest corners of the financial world may not be good for your blood pressure, because if you have any contact with the market, even a retirement account, this story is happening to you. But in the end, Flash Boys is an uplifting read. Here are people who have somehow preserved a moral sense in an environment where you don’t get paid for that; they have perceived an institutionalized injustice and are willing to go to war to fix it.

About the Author

Michael Lewis was born in New Orleans, Louisiana on October 15, 1960. He received a BA in art history from Princeton University in 1982 and a Masters in Economics from the London School of Economics in 1985. He is a non-fiction author/journalist of mostly financial themes. His books include Liar's Poker, Moneyball: The Art of Winning an Unfair Game, The Blind Side: Evolution of a Game, The Money Culture, and Boomerang.

Editorial Reviews

"Dazzling… guaranteed to make blood boil… riveting." - Janet Maslin, The New York Times
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