14 ms·

Michael Lewis: The Wolf Hunters of Wall Street

60 points by yarapavan 13y ago

darky2005 13y ago
Well, here is the opposing opinion I'd like to share: http://scottlocklin.wordpress.com/2014/04/04/michael-lewis-shilling-for-the-buyside/ http://scottlocklin.wordpress.com/2014/04/04/michael-lewis-s... And I think it is closer to reality
- brubaker 13y ago
  Blowhardy and hack writing detected. Also shameless attacking of Lewis and defending of wall street all rolled into one.
- mmaldacker 13y ago
  Excellent article! People should keep in mind when saying that HFT is siphoning money out of markets that their revenue is much, much smaller than hedge funds and investment banks.
- brymaster 13y ago
  And here's his retort to these brash blog posts attempting to portray him as sinister: http://www.salon.com/2014/04/11/michael_lewis_hits_back_at_critics_this_time_i_punched_wall_street_in_the_balls/ http://www.salon.com/2014/04/11/michael_lewis_hits_back_at_c...
lmg643 13y ago
Not sure why this is getting resubmitted as a front page article. Having read the book and most of the coverage of "flash boys", I'm surprised and disappointed by the complete lack of any statistics to prove the assertion that the market is rigged, or even statistics that show how investor orders are disadvantaged. Describing certain aspects of the market that appear to be unfair and then making it seem as if the entire market is "rigged" is a big leap. I'm amazed that they have gotten such a free pass from the press on this. I guess people are suckers for stories that play on people's fears about malfeasance by the wealthy and powerful.
- tptacek 13y ago
  Especially amusing given that the "malfeasance" in this case is directed at institutional Wall Street and giant hedge fund managers, and perpetrated by outsiders.
- leverage 13y ago
  Agreed. ML is the "Wolf Hunter", but in this case, he was hunting sheep. I am astonished by the press's reaction to this. I think a lot of it has to do with the relatively small and obscure HFT industry - it is not well understood, and it is easier to believe it is rigged than to understand what it is. To even call it "high frequency trading" is not fair - this implied large volumes throughout the day by continuously providing quotes on both sides of a given security. Their PnL comes from the bid/ask spread and rebates for providing liquidity. They are primarily market makers. This is 99.99% of the HFT industry. Instead, ML and IEX are talking about "speed trading" or, as the press has coined it, "latency arbitrage" - they take advantage of their speed to reach exchanges (2 milliseconds vs. 20 milliseconds) to front-run orders and react quicker to new information. These types of trades only happen at points during the day when signals are met, and they do not provide liquidity but rather cross existing orders (often times before the exchange receives the cancel message from the participant) and TAKE OUT liquidity. I would say less than 1% of HFT firms engage in this type of unethical activity. An example: Imagine it's 9:29am and the Dept of Labor Statistics is going to release the monthly unemployment numbers. There is a positive expectation, and so before market open there are a lot of buy SPY (S&P 500 ETF) orders queued. The report comes out at 9:30am as the markets open, and the numbers are bad. Now, a rational investor would immediately attempt to cancel his order for SPX as the market is going to move downward. Imagine at the same EXACT time, a speed trader see's this investors buy order on the book and decided to cross him and sell. Due to his speed advantage, the exchange receives his message to cross before the investors message to cancel. The investor loses out, SPX invariably moves down, and the speed trader then buys everything he just sold for an essentially risk-less profit. A final point is this: for any buy-side market participant (anything from a mutual fund to a "Average joe"), transaction costs are much lower due to the much higher liquidity and tightened spreads that high frequency trading has brought to the markets. HFT is making the markets more efficient. Cliff Asness (Founder, AQR Capital Mgmt) wrote a piece in WSJ talking about this: http://online.wsj.com/news/articles/SB10001424052702303978304579475102237652362 http://online.wsj.com/news/articles/SB1000142405270230397830...
plg 13y ago
So now NY Times is in the business of publishing "teasers" to incite people to buy this guy's book? I hope he is giving them a royalty on future sales.
- ylem 13y ago
  Actually, there can be unintended consequences. The article is long enough that I no longer feel a need to buy the book...
- jimhart3000 13y ago
  This is long established practice in the publishing business - publications getting exclusive excerpting rights to upcoming big books. Lewis's name can help move some issues of the Times, and the exposure there helps move some books. Lewis also has a long history with the Times magazine, so it's unsurprising to see them get excerpt rights.
brazzy 13y ago
God, I hate this kind of long-form article that constantly interrupts the main story with jazzed-up mini-biopics of the next person they're going to introduce... Very irritating to read.
dang 13y ago
Duplicate of https://news.ycombinator.com/item?id=7500426 https://news.ycombinator.com/item?id=7500426.
HockeyPlayer 13y ago
I just talked to a couple of people who trade options in the pits, and it is amazing how much cleaner and fairer the electronic markets are than the old system.
lotsofmangos 13y ago
Without meaning to cast aspersions, I often find it hard to trust technical commentary on the potential effects of controversial aspects of markets as anyone who really knows what they are talking about is very likely to have a financial incentive influencing what they are saying, no matter which side they are on or how level headed they try to be.

60 points by yarapavan 13y ago

darky2005 13y ago

Well, here is the opposing opinion I'd like to share: http://scottlocklin.wordpress.com/2014/04/04/michael-lewis-shilling-for-the-buyside/ http://scottlocklin.wordpress.com/2014/04/04/michael-lewis-s... And I think it is closer to reality

brubaker 13y ago
Blowhardy and hack writing detected. Also shameless attacking of Lewis and defending of wall street all rolled into one.
mmaldacker 13y ago
Excellent article! People should keep in mind when saying that HFT is siphoning money out of markets that their revenue is much, much smaller than hedge funds and investment banks.
brymaster 13y ago
And here's his retort to these brash blog posts attempting to portray him as sinister: http://www.salon.com/2014/04/11/michael_lewis_hits_back_at_critics_this_time_i_punched_wall_street_in_the_balls/ http://www.salon.com/2014/04/11/michael_lewis_hits_back_at_c...

lmg643 13y ago

Not sure why this is getting resubmitted as a front page article. Having read the book and most of the coverage of "flash boys", I'm surprised and disappointed by the complete lack of any statistics to prove the assertion that the market is rigged, or even statistics that show how investor orders are disadvantaged. Describing certain aspects of the market that appear to be unfair and then making it seem as if the entire market is "rigged" is a big leap. I'm amazed that they have gotten such a free pass from the press on this. I guess people are suckers for stories that play on people's fears about malfeasance by the wealthy and powerful.

tptacek 13y ago
Especially amusing given that the "malfeasance" in this case is directed at institutional Wall Street and giant hedge fund managers, and perpetrated by outsiders.
leverage 13y ago
Agreed. ML is the "Wolf Hunter", but in this case, he was hunting sheep. I am astonished by the press's reaction to this. I think a lot of it has to do with the relatively small and obscure HFT industry - it is not well understood, and it is easier to believe it is rigged than to understand what it is. To even call it "high frequency trading" is not fair - this implied large volumes throughout the day by continuously providing quotes on both sides of a given security. Their PnL comes from the bid/ask spread and rebates for providing liquidity. They are primarily market makers. This is 99.99% of the HFT industry. Instead, ML and IEX are talking about "speed trading" or, as the press has coined it, "latency arbitrage" - they take advantage of their speed to reach exchanges (2 milliseconds vs. 20 milliseconds) to front-run orders and react quicker to new information. These types of trades only happen at points during the day when signals are met, and they do not provide liquidity but rather cross existing orders (often times before the exchange receives the cancel message from the participant) and TAKE OUT liquidity. I would say less than 1% of HFT firms engage in this type of unethical activity. An example: Imagine it's 9:29am and the Dept of Labor Statistics is going to release the monthly unemployment numbers. There is a positive expectation, and so before market open there are a lot of buy SPY (S&P 500 ETF) orders queued. The report comes out at 9:30am as the markets open, and the numbers are bad. Now, a rational investor would immediately attempt to cancel his order for SPX as the market is going to move downward. Imagine at the same EXACT time, a speed trader see's this investors buy order on the book and decided to cross him and sell. Due to his speed advantage, the exchange receives his message to cross before the investors message to cancel. The investor loses out, SPX invariably moves down, and the speed trader then buys everything he just sold for an essentially risk-less profit. A final point is this: for any buy-side market participant (anything from a mutual fund to a "Average joe"), transaction costs are much lower due to the much higher liquidity and tightened spreads that high frequency trading has brought to the markets. HFT is making the markets more efficient. Cliff Asness (Founder, AQR Capital Mgmt) wrote a piece in WSJ talking about this: http://online.wsj.com/news/articles/SB10001424052702303978304579475102237652362 http://online.wsj.com/news/articles/SB1000142405270230397830...

plg 13y ago

So now NY Times is in the business of publishing "teasers" to incite people to buy this guy's book? I hope he is giving them a royalty on future sales.

ylem 13y ago
Actually, there can be unintended consequences. The article is long enough that I no longer feel a need to buy the book...
jimhart3000 13y ago
This is long established practice in the publishing business - publications getting exclusive excerpting rights to upcoming big books. Lewis's name can help move some issues of the Times, and the exposure there helps move some books. Lewis also has a long history with the Times magazine, so it's unsurprising to see them get excerpt rights.

brazzy 13y ago

God, I hate this kind of long-form article that constantly interrupts the main story with jazzed-up mini-biopics of the next person they're going to introduce... Very irritating to read.

dang 13y ago

Duplicate of https://news.ycombinator.com/item?id=7500426 https://news.ycombinator.com/item?id=7500426.

HockeyPlayer 13y ago

I just talked to a couple of people who trade options in the pits, and it is amazing how much cleaner and fairer the electronic markets are than the old system.

lotsofmangos 13y ago

Without meaning to cast aspersions, I often find it hard to trust technical commentary on the potential effects of controversial aspects of markets as anyone who really knows what they are talking about is very likely to have a financial incentive influencing what they are saying, no matter which side they are on or how level headed they try to be.