US stock market is rigged by high-speed traders
 

"The US stock market is rigged in favour of high-speed electronic trading firms, which use their advantages to extract billions from investors, according to the acclaimed author Michael Lewis.

In his new book Flash Boys: A Wall Street Revolt, Lewis says that firms are using their speed advantage to profit at the expense of other market participants to the tune of tens of billions of dollars."

Full story http://www.theguardian.com/business/...-michael-lewis



" "They are able to identify your desire to buy shares in Microsoft and buy them in front of you and sell them back to you at a higher price," Lewis, whose book is available on Monday, said on the television program 60 Minutes on Sunday.

"This speed advantage that the faster traders have is milliseconds, some of it is fractions of milliseconds," said Lewis, whose books include The Big Short and Moneyball.

High-frequency trading (HFT) is a practice carried out by many banks and proprietary trading firms using sophisticated computer programs to send thousands of orders into the market in an instant, executing a small portion of them when opportunities arise to capitalise on price imbalances, or to make markets. HFT makes up more than half of all US trading volume.

The trading methods and technology that make HFT possible are all legal, and the stock exchanges HFT firms trade on are highly regulated.

Proponents of HFT argue that the presence of such firms makes it easier for all market participants to find buyers and sellers for their trades, and that the speed at which HFT firms can detect and take advantage of pricing imbalances between different markets and assets leads to smaller bid-ask spreads.

But Brad Katsuyama, former head trader in New York for the Royal Bank of Canada and a major figure in Lewis's book, said he was finding that when he would send a large stock order to the market, it would only be partially filled, and then he would have to pay a higher price for the rest of the order. "

Story continued http://www.theguardian.com/business/...-michael-lewis

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