Book Review: Flash boys: Cracking The Money Code
Written by one of the most prolific and topical contemporary American writers, Michael Lewis, Flashboys is an expose’ of dark trading systems in international money and financial markets. This is the third book written by Lewis after the massively successful ‘Money Ball’ and ‘The Big Short’, both of which saw movies based on them being screened in Hollywood theatres. While ‘Money ball’ presented a case for the use of analytics to improve the odds of picking a winning baseball team, ‘The Big Short’ provided an insider look into the building of the now infamous housing bubble during the recent US Financial Crisis.
In Flashboys, Lewis dons his financial journalist hat and lets us into the dark and rarely understood world of high frequency trading (HFT) in US financial markets. He goes on to shed significant light on how some traders are rigging entire systems and exchanges in their favour, if only for some milliseconds, to gain edge over other small unsophisticated trading parties. He comes to explain even the most complicated financial jargon, e.g. front running, dark pools etc. in a simple succinct manner that makes even a finance layman understand and appreciate the complexities and underlying murkiness of this world.
Lewis tracks multiple human stories in this book that makes the plot far more interesting than a topic about high frequency trading in financial markets would have warranted. In Brad Katsuyama, a trader at Royal Bank of Scotland who later quit to start his own private exchange, Lewis finds an unlikely hero who decides to take it in his hands to improve the business of stock markets after discovering many unfair practices in high frequency trading in US markets. Equally fascinating is the story of Sergey Aleynikov, a Russian computer programmer, who was arrested by FBI after he quit his job at Goldman Sachs. He was charged by US Government of stealing Goldman Sach’s computer code.
It is this ability of Lewis to humanize the vagaries of financial markets through the eyes of its very real participating agents that makes the narrative of the book flow effortlessly. However, it is also this aspect that makes it difficult for the readers to follow the timeline and various events in the book as each individual’s story appears disjoint at many points in the book. It is only at the end that a reader is able to fully understand and arrive at the sum of the parts of this book.
This book is a must read for people who are interested in knowing how the oft-understood world of algorithm and high-frequency trading works. It will provide the readers with an inside look on how little this market is understood even by people who are actively participating in it and how easily it can be manipulated by a certain section of the agents with informational and monetary advantage.