The most iconic stock market in global capitalism is rigged, according to best-selling author Michael Lewis, who is about to release a new book on high-frequency trading called Flash Boys.
Lewis, who wrote Moneyball as well as a host of other highly-regarded titles, has sat for an interview with CBS’s 60 Minutes program to promote the launch.
“The United States stock market, the most iconic market in global capitalism is rigged,” Lewis said of the affect of high-frequency trading.
HFT is a controversial topic. Technology has enabled sophisticated investors to employ algorithms, which dictate when shares are bought and sold. This gives high-frequency traders an advantage of milliseconds, but this, according to Lewis, is enough to pre-empt the orders of other investors and essentially “front run” them. Authorities in the United States have recently launched two probes into the practice.
“It drives the price up, and you pay a higher price,” he said. The victims are “anyone who has an investment in the stock market.”
“If it wasn’t complicated, it [HFT] wouldn’t be allowed to happen … The complexity disguises what is happening. It’s so complicated you can’t understand it and you can’t question it.
“The insiders are able to move faster than you, they’re able to see your order, and play it against other orders in ways you can’t understand.
“They are able to understand your desire to buy shares in … Microsoft [for example] … and buy them in front of you, and sell them back to you at a higher price.
“This form of front-running is legal; it’s legal front-running.”
Here’s the full 60 Minutes interview:
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