Weekend Reads for Finance Pros: Flash Boys, the SEC on Social Media, and Hiring Slackers
“Who knew high-frequency trading was such a sexy subject? Certainly not Michael Lewis, who says he didn’t anticipate the level of blowback to Flash Boys.” So begins a Bloomberg Businessweek article on the response to Lewis’s latest book, which just went on sale and is already an Amazon best seller.
Why all the fuss? Lewis says the stock market is rigged. “Computerized trading and computerized scalping are two different things. These firms make their money by front-running trades. They’re using their speed advantage to buy shares first and then selling them back at a higher price. The result is higher prices for investors in those shares. That’s rigged.”
Not surprisingly, the book has raised hackles and divided opinion on Wall Street. It has “been called an ‘unjust vilification of an entire industry’ by William O’Brien, the president of exchange operator BATS, and lauded as a probe into ‘a growing cancer’ by Charles Schwab, head of the eponymous discount brokerage.”
If you haven’t had a chance to catch up on why it’s creating such a stir, here are a handful of articles, along with some other interesting reads you might have missed.
High-Frequency Trading
- In the podcast, “On a ‘Rigged’ Wall Street, Milliseconds Make All the Difference,” Lewis talks to Fresh Air‘s Terry Gross. (NPR)
- “Flash Boys versus Skynet — How Wall Street May Be Even More Dangerous than Michael Lewis Thinks” (Contrary Brin)
- “How to Beat High-Frequency Traders” (AAAI)
- “Flash Boys by Michael Lewis: What the Reviews Say” (Wall Street Journal)
- Flash Boys suggests that Morgan Stanley eked out an advantage over Goldman by building infrastructure to serve high-frequency traders, known as Speedway, which “was now making Morgan Stanley $500m a year, and . . . it was growing,” prompting the firm to dispute the suggestion that improvements in its equities business have been driven by controversial high-frequency trading. (Financial Times)
- Cliff Asness of AQR Capital Management on the “High-Frequency Hyperbole.” (Wall Street Journal)
- My colleague Jason Voss, CFA, has put together a short, curated list of some of CFA Institute’s content on high-frequency trading — an issue we think is here to stay for years to come. (Enterprising Investor)
Big Data, Math
Typically thoughtful @TimHarford essay on the promise & perils of big data, & why Google Flu Trends eventually failed http://t.co/mqtHctOFos
— Justin Wolfers (@JustinWolfers) April 3, 2014
Wow! Check out these gorgeous maps of roots of polynomials in the complex plane http://t.co/FqSHLiNGei ht @panlepan
— Steven Strogatz (@stevenstrogatz) April 3, 2014
Behavioral Finance
China
- On the face of it, Chinese President Xi Jinping and Jorge Mario Bergoglio, better known as Pope Francis, would seem to have very little in common. But as William Presek points out in “What Xi Jinping Could Learn from the Pope,” these world leaders should really be sharing notes. (Bloomberg View)
Social Media
- The SEC just released an update to its social media guidance. Michael Kitces explains it all: “News Highlight: SEC Issues New Guidance on Social Media and Testimonial Rule 206(4)–1.” (Nerd’s Eye View)
Warren Buffett’s Performance
- “Being Good, Until One’s Not” (Statistical Ideas)
Private Banking
- “Swissness Is Not Enough: Big and Small Must Adapt to Survive” (The Economist)
And Now for Something Completely Different
- “Success is whatever is extraordinary for you,” “the virtues of failing spectacularly,” and other take-aways in “Why Dean Karnazes Is the Most Successful Runner on Earth.” (Outside)
- “Hire an Ex-Slacker Today” (Bloomberg View)
‘Simply put, people gravitate toward ideas that are simple to understand.’ http://t.co/j7gJtCS2v3
— Lauren Foster (@laurenfosternyc) March 31, 2014
Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.
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