HFT, Michael Lewis, and a Question

The last 2 days of buzz about Michael Lewis’s “expose” of high frequency trading, Flash Boys, has led to a lot of articles and debates. At my house, we’ve been talking about some of the issues for a while now.  In the last 18 months as I’ve learned a little about HFT — very casually, mind you — I’ve started saying that I hope it gets regulated out of existence. But let’s try a little thought exercise.

Someone who loves to play devil’s advocate asked me what the conceptual difference is between what HFT-ers are doing and what telegraphs enabled banks and the owners of the telegraph lines to do: use their privileged position to obtain and act on financial information sooner than the public.

I do not have a pat answer to that question. The best I’ve got so far is something like, “Even if it has always happened, it’s still wrong.” I’m curious to know others’ thoughts.

Separately, it’s unfortunate that it takes a remarkable self-promoter like Michael Lewis to (possibly) spur change. The way he has approached the roll-out of this book is about a marketing opportunity and is setting off a lot of alarm bells for me. I think that gaming of the financial system will always exist, that regulation ought not to depend on the general public’s sense of outrage, and that Michael Lewis may be promoting an overly simple of what’s good, what’s bad, and what ought to happen next.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.