No one else could have written Flash Boys, Michael Lewis’ new book on high-frequency traders.
The former bond salesman turned financial journalist has an uncanny gift for finding human narratives in dry, complex stories.
The colour in his writing, in Flash Boys and in his other books, has put a face on greed, ambition and at times, the self-consciousness of his protagonists, salved by their status on high-stakes, big money Wall Street.
With Flash Boys, Lewis undoubtedly proves his point.
High-frequency trading has been under-analysed as a risk in the market, or smothered in layer upon layer of jargon. It is an important, realised work that deserves full credit for lifting the veil on this shadowy world.
Lewis begins by conjuring images of a stock market from another era, with thick-necked, tense and bellowing traders calling orders from a crowded floor. This picture is quickly painted as a myth.
Today, as Lewis shows, markets are dominated by new-age investors who use complex algorithms to win an advantage of microseconds.
Ordinary people are the victims, with their investments –- made by mutual funds who place their orders through big Wall Street brokerages –- bid up in price by the algorithms employed by the HFT outfits right before they try to buy.
Lewis arrives at the conclusion markets are rigged, with the HFT traders using their technology to predict, and take advantage of traditional investors’ market orders.
But its lacks the riveting colour of his previous titles, and its characters are, sadly, sometimes one dimensional in comparison.
Brad Katsuyama is Lewis’ protagonist. A former Royal Bank of Canada trader who quits his well-paid Wall Street job to start his own stock exchange, after learning, through a series of experiments and observations, that the modern-day market is stacked against him.
Katsuyama is cast as a force of good, a down-to-earth, honest man who realises the gravity of the situation, and feels the need to do something about it.
“It feels like I’m an expert in something that badly needs to be changed. I think there’s only a few people in the world who can do anything about this. If I don’t do something right now — me, Brad Katsuyama — there’s no one to call,” he tells his future wife.
We find out a lot about the personal lives of the people who start the exchange. There is Ronan Ryan, a no-nonsense Irish telecom expert who swears a lot, and generally tells it like it is, an interesting contrast to the tiptoeing of many finance types, as well as a host of other diverse personalities who drive the narrative.
Though at times, it feels like Katsuyama is depicted as this lone force of good, taking on an amoral, greed-fuelled, shadowy world, with his only ambition to fix a problem. This could be true, though human experience will leave most readers, especially some who’ve worked in finance, thinking this is slightly naive.
A wealth of personality is still provided in Flash Boys, but the explorations of these peoples’ pasts, and their desires and goals, at times feels irrelevant to the bigger picture of high-frequency trading. It’s still interesting, but it’s not like the storytelling in The Big Short, which gives readers a snapshot into the motivations of the people who caused the financial crisis, with anecdotes from their formative years, and their time on Wall Street, that humanise the complexities of the meltdown.
The personal stories, the motivations and the fears of all his characters are still there, and still riveting. Simply though, they are not as engaging as the snapshots we’ve seen in his previous work.
This could be because Lewis was — in part — following this story as it developed, rather than assessing it with hindsight, and access to more people. Maybe it is just that HFT — while a serious topic — doesn’t carry the awe-inducing gravity of a full-blown financial crisis.
In Flash Boys, it is as though Katsuyama and his guys are good, and nearly everyone else is complicit, in denial or naive. RBC, where Katsuyama works, is depicted as the nicest of the Wall Street banks, and that — in part — his time there fosters the simple, good-heartedness Katsuyama arrived there with. This could be true, and Katsuyama could be everything Lewis describes him as. Without the depth of colour we’ve seen in his previous work though, readers must take the author at his word.
This is important, because the genius of Lewis’ work is that he makes finance human, and interesting, as if his books could be movies. If his subjects were tackled by nearly anyone else, they would only appeal to a niche, industry audience. That’s why he’s one of the best non-fiction writers working today.
Flash Boys pales only in comparison to Lewis’ previous work. He’s the guy setting the benchmark, and the book’s shortcomings are only evident because he has set the bar so high.
It is still a piece of masterful storytelling, which distils a convoluted and murky topic — one that affects so many ordinary people around the world — and makes it easy to understand. Readers will be shocked, and thankful he took the time to lift the lid on high-frequency trading, and perhaps a little sickened to learn what’s been going on.
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