"Flash Boys" Book Writeup
August 01, 2014
What’s the point?
As the US stock market becomes more and more computerized, it has given rise to a new industry of high frequency, automated trading. The days of hundreds of brokers, all yelling across a crowded room and waving papers over their head, are over.
Now the chaos happens in a data center somewhere, as algorithmic trading models fight to be the fastest to respond to market data and jockey for physical proximity to key machines inside a data center.
How was it?
I came into this book with a pre-existing mental model of high frequency trading (HFT), due to the increasing media coverage in recent years. I think nearly every programmer who has entered the field in the past 5 years has been approached or interviewed with some kind of company that deals with automated trading (they were a mainstay at job fairs when I was in school).
I’m a big fan of Michael Lewis (Moneyball, Liar’s Poker, The Big Short) and I am aware of the criticism he receives. Putting aside whether his accounts are always unbiased or 100% factual, the guy knows how to write a great story and this book was thoroughly enjoyable.
To give you a sense of the weird intersection of technology and trading, the story opens with a plan to drill a tunnel through the side of a mountain so that a fiber optic cable could have a straight-line path from Chicago to NYC (thus shaving milliseconds off the transmission time).
Lewis frames the HFT shops as a mysterious and deceptive lot and focuses on the innovation-slash-righteous-crusade of a Canadien banker who unravels how HFT is influencing the US stock market.
Who should read it?
This book is something to read for pleasure. It’s light on practical advice, but the story is intriguing, especially given the tie-ins with programming and software.