‘The Market Is Rigged’ – Michael Lewis Explains How HFTs ‘Screw’ Investors Every Day

H/t reader M.G.:

“The Stock Market is Rigged in favor of High Frequency trades” says an article on Reuters. No kidding.
The article says better than half of all transactions are now HFT…..actually, it is 85%. I call it skim and sell.


U.S. stock markets are rigged, says author Michael Lewis (Reuters, March 31, 2014)

“The Market Is Rigged” – Michael Lewis Explains How HFTs “Screw” Investors Every Day (ZeroHedge, March 31, 2014):

It was almost excatly five years ago to the day, on April 10, 2009, that Zero Hedge – widely mocked at the time by “experts” – began its crusade against HFT and the perils of algorithmic trading (which of course were validated a year later with the Flash Crash). In the interim period we wrote hundreds if not thousands of articles discussing and explaining the pernicious, parasitic and destabilizing role HFT plays in modern market topology, and how with every passing day, markets are becoming increasingly more brittle, illiquid and, in one word, broken. Or, as Michael Lewis put it most succinctly, “rigged.” With Lewis’ appearance last night on 60 Minutes to promote his book Flash Boys, and to finally expose the HFT scourge for all to see, we consider our crusade against HFT finished. At this point it is up to the general population to decide if this season’s participants on Dancing with the Stars or the fate of Honet Boo Boo is more important than having fair and unrigged markets (obviously, we know the answer).

For those who missed it, here is the full video again.

And broken down by segment: in the clip below, Lewis explains how an extra millisecond allows high-frequency traders to exploit computerized trading in the U.S. stock market. By “beating” investors to exchanges, Lewis argues that high-frequency traders can buy stocks and quickly sell them back at higher prices.

Billions have been spent by Wall Street firms and stock exchanges to gain the advantage of a millisecond. “Is it a scam?” 60 Minutes correspondent Steve Kroft asks. Bigger, Lewis says.

Lewis further explains, video below, how ordinary investors are affected and argues that high-frequency traders have created instability in the stock market — for everyone.

A reoccurring metaphor Lewis uses in his book “Flash Boys” is one of “prey and predators.”According to Lewis, the prey is “anybody who’s actually an investor in the stock market.”

3 thoughts on “‘The Market Is Rigged’ – Michael Lewis Explains How HFTs ‘Screw’ Investors Every Day

  1. The biggest problem is for the real investors (as I used to be), those who put real money into the system. As these brokerage houses get too big, a sharp move south will topple all of them. It is Enron accounting on a grand scale, and Moody’s ought to be facing the world court for exporting such depraved accounting. Since all credibility is gone, it won’t happen.
    For those who don’t remember, this is how Enron worked. Enron would take a big debt and move it off their books into a shell company. They listed the debt as an asset of the shell, and had the shell give them big (fictitious) orders they would list as assets. Spinning straw into gold…….
    They did it with many shell companies, and this is why their stock soared for year after year…..until the world economy started crashing.
    Once the market crashed, so did Enron. The same will happen with all the greedy guts, and millions more people will suffer, starve and desperation will grow.
    Greed is like a disease, it grows like the plague, and eventually kills all who get it.

Leave a Comment