[Click.] “Buy.” [Whiz.] “No longer available.”
This is what was happening to Brad Katsuyama. Frustrating, eh? Flash Boys by Michael Lewis tells the story of Brad Katsuyama and his journey to understand the dark secret of high-frequency trading. Once he fully understood what was happening, Brad created his own stock exchange.
Stock exchanges are not created everyday, so something massive was happening.
As Michael Lewis poignantly pointed out recently, the stock market is rigged.
Ex. a super-speedy computer knows I want to buy a share of Twitter at $42, so the computer buys the share before me, and raises the price. When I try again to buy the share, I have to buy it from the computer and the Mr. Speedy makes a few cents off of me.
Essentially, high frequency trading allows for nickel and diming…but it adds up to millions.
I’ll let Michael Lewis take it from here, I hope you’ll read an adaptation from Flash Boys courtesy of The New York Times.
(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)