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Bodek's Amazon Critique of "Flash Boys"

CalibratedConfidence's picture




 

The days since the 60 Minutes interview of Lewis we've witnessed the HFT "debate" maintaining two distinct types of "debate".  One is that which takes place in the generic public realm...on TV, in op-eds, through small open forums, books, Twitter, etc.  The other is taking place directly between documented whistle-blowers, those who originally sounded the alarm, and those who are directly involved with the entities at the core of all this. 

Sadly, there has yet to be an organized and publicly broadcasted forum with the time requirements necessary to openly lay out concerns and address issues being talked about from both sides.  Video and intense unscripted and unexpected interaction makes for great entertainment but also can seriously damage a very real topical discussion, such as we saw with many of the TV interviews that followed CNBC's notorious HFT debate, specifically Chuck "Dees Nuts" Gasparino's attempt to stir up controversial energy during Clairman's "Flash Boys" marketing pitch time slot. 

With that said, given the FT piece released by Bodek and Smith along with Haim's Amazon review of "Flash Boys", now seems to be the beginning of an opportunity to steer this "debate" into one that is more civilized and mature (see Narang and Bodek on Reuters Insider for an example).  I get emotional about this topic just like many of you do but if we're serious about the comments we're levying about the micro-struture, we all owe it to ourselves to change the atmosphere around this "debate" and begin the un-sexy process of discussing the complications of creating a globally accessible American market-structure that can handle the complexity of participants needs along with the complexity of enabling such a dynamic system to run smoothly and structurally operate relatively predictably in a forum that isn't 5-8 minute with a NYSE backdrop and an utterly clueless panel of moderators asking ignorant and very simple "questions".

Before reading the review, ask yourself how you view Michael Lewis.  Is he a writer piecing together a compelling story the draws from real events and uses embellishments or is he an anthropologist (think David Graeber) of  finance and someone the public trusts based on his marketing to relay well researched and cited facts from a broad swath of sources?

Read Haim's review of Flash Boy's on Amazon and if you have an Amazon account, let him know what you think of the critique by clicking whether the review was helpful or not after the post. 

Here's a few key points:

Don't Be Scared To Learn A Bit:

...the only place where Lewis really succeeds is that he somehow created enough interest in Flash Boys to convince readers it was worthwhile learning a little bit about the mechanics of the market.

Add More Complexity or Have A Industry Reform Effort?:

Lewis really needed to do a better job distinguishing between the need to develop commercial solutions to protect institutional investors in today's electronic markets and the need for the industry to rise to the
greater challenge of reforming what I describe as an HFT-oriented marketplace.

More Complexity Won't Work:

I...think that such commercial products are not going to solve the market's woes and it is misleading to pitch them to the retail investor as primary tools in solving the greater problems of the market.

Lewis' Profit Motive Over Noble Corruption Exposing Motive:

For me, the most perplexing thing about Flash Boys is that Lewis at best glosses over the primary features of HFT activity that the SEC is investigating, including discriminatory fee treatments and order handling, price-time priority corruption (e.g. queue jumping), and potentially collusive arrangements between HFTs and exchanges.  Lewis could have also addressed other artifacts of the market structure in much more detail that impact investors such sub-pennying activity, rebate arbitrage mechanics, discriminatory treatment in dark pools, internalization rules, ...

Misses A Critical Piece About The Market's Sturcture (Dark Pools):

I contend that Lewis should have done a lot more to identify the parties involved and tell the full story of latency arbitrage in Sigma X.

What Flash Boys Isn't:

In conclusion, the narrative of Flash Boys...isn't the story of how HFTs, Regulation NMS, and heavily conflicted for-profit exchanges brought the US equities market to a crisis point
and what we can do about it.

Bonus: lastly, some extra information on the UTP/SIP: CALtv - UTP/SIP Commentary

 

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Sat, 04/12/2014 - 02:18 | 4650378 malek
malek's picture

 the beginning of an opportunity to steer this "debate" into one that is more civilized and mature

Sorry, but both you and Haim miss the boat there.
From the review on Amazon I can only say: critique on many different angles but very little concise suggestions how Lewis should have done it better. And that's pretty bad for being a too long-winded review in the first place.
But basic tenor seems to be that Lewis simplified too much. Yeah, I'm sure if he written a 2000 page tome instead everyone would be happy /sarc

And, as usual, many discussion participants fail to realize that calls for more and better rules and regulations lead nowhere - KISS.

Fri, 04/11/2014 - 23:36 | 4650154 assistedliving
assistedliving's picture

simple answer everyone hates:  Tobin tax

 

Fri, 04/11/2014 - 14:00 | 4648206 shutdown
shutdown's picture

How come nearly all of the unkind reviews on Amazon contain very poor grammar and lousy punctuation?   

Fri, 04/11/2014 - 11:12 | 4647531 Nico Bellik
Nico Bellik's picture

nope nope nothing to see here just move along

Fri, 04/11/2014 - 09:42 | 4647115 mccvilb
mccvilb's picture

OMFW, Yogi was right. This is deja vu all over again.

How can a serious discussion of all of the criminal activity inherent in HFT take place while ignoring the corrupt nature and duplicity of all the parties responsible? This corruption has been elegantly crafted over decades like a virus without any known origin while we constantly struggle with trying to separate the MSM misdirection from the truth. Call in the CDC. Call Doctors Without Borders.

I haven't read Lewis's book and won't. It's like another Margin Call or Wall Street. It identifies few of the symptoms and ignores the desease, which is all one can expect of a layman's work product. However if you go over to Youtube and watch Haim Bodek's documentary on how he and his HFT algo were unknowingly taken advantage of, you're left with little sympathy for the snake with the infra red vision who was eaten by the mongoose with the immunity to its venom.

What nobody will say is that this cannot be fixed. It's a total and complete utter charade. We would be better served revisiting 19th Century author Honor'e de Balzac's The Human Comedy and laughing to the point of crying over our own foolishness.

Fri, 04/11/2014 - 09:49 | 4647147 Confused
Confused's picture

Bingo. And Haim is still invovled in some form. So he remains conflicted to a degree. 

Thu, 04/10/2014 - 10:13 | 4642967 Notsobadwlad
Notsobadwlad's picture

IMO, the release of flash boys is half distraction and half preparation for the next large-scale wealth transfer/market crash... BECAUSE THE PEOPLE WILL DEMAND THAT ALL OF THE ILLEGAL, UNETHICAL AND IMMORAL THINGS THAT HAVE LEVITATED THE MARKET BE STOPPED... and when they are stopped, there is nothing to hold up markets and prices.

HFT is just a tiny part of it, but it makes a great scapegoat so that the real criminals escape free and clear.

Thu, 04/10/2014 - 10:06 | 4642931 illyia
illyia's picture

Completely off topic -

Nice composite picture, I must say, calibrated. A little joker, a little durden, a little orwell, a little masterpiece.

Did you make it yourself? Very clever.

Just giving it where its due...

Thu, 04/10/2014 - 09:29 | 4642808 nowhereman
nowhereman's picture

 

"For me, the most perplexing thing about Flash Boys is that Lewis at best glosses over the primary features of HFT activity that the SEC is investigating, including discriminatory fee treatments and order handling, price-time priority corruption (e.g. queue jumping), and potentially collusive arrangements between HFTs and exchanges."

For Christ's sake. if he didn't write "your" book, rather than criticize, write your own.

Fri, 04/11/2014 - 10:59 | 4647458 ebworthen
ebworthen's picture

The American public would have stopped reading the book halfway through that sentence.

Fri, 04/11/2014 - 09:46 | 4647140 Confused
Confused's picture

https://www.youtube.com/watch?v=kFQJNeQDDHA

 

Just in case anyone is not familiar with HB and has missed this. Its a bit long, if you don't have time, but perhaps worth checking out considering. 

Thu, 04/10/2014 - 08:10 | 4642562 ThisIsBob
ThisIsBob's picture

Write your own godamn book then.

Fri, 04/11/2014 - 13:03 | 4647978 Lord Koos
Lord Koos's picture

Really... a guy writes a book that can some positive changes, but this guy can only take potshots.  What have you done lately?

Thu, 04/10/2014 - 19:25 | 4645517 CalibratedConfidence
Fri, 04/11/2014 - 10:54 | 4647445 ebworthen
ebworthen's picture

The problem is not that the markets are rigged so much as the whole society.

Fri, 04/11/2014 - 09:45 | 4647130 Confused
Confused's picture

Mr. Bodek is an interesting character. Obviously a bit conflicted as well, considering he is still working in the space. And we can also assume that Mr. Lewis' representation is only a small look into said space. While we can debate one way or another, the real take-away is that the book has, at the very least, shed some light onto this. 

 

But we would be foolish to think anything will change for the better. At least long term. The market is a casino, and will continue to be so. The big fish will always eat the little fish. 

 

Thanks for the links. 

Thu, 04/10/2014 - 08:35 | 4642644 newdoobie
newdoobie's picture

Write your own godamn book that someone will read then. (fixed it for ya)

Thu, 04/10/2014 - 11:12 | 4643270 Isotope
Isotope's picture

I think this is the key to many of his criticisms. Most of the things he mentions are in the MEGO (My Eyes Glaze Over) category. This doesn't imply that the average reader is stupid. These concepts can be highly technical and very "dense." This was not written as a textbook. It has to be readable.

Thu, 04/10/2014 - 07:42 | 4642521 Pee Wee
Pee Wee's picture

By "complexity of participants needs" surely the author doesn't mean inventing new words and creating a doctrine designed to break the law.

Thu, 04/10/2014 - 00:56 | 4642205 Godisanhftbot
Godisanhftbot's picture

 dont look now

 bitcoin shitting itself.

 as are bitcon pumpers and holders.

 $100 soon

 

 

Thu, 04/10/2014 - 07:07 | 4642462 TideFighter
TideFighter's picture

"Do you expect me to talk?"

"No, we expect you to die, Mr. Lewis!"

"Take this nail gun with you and go sit in the hot tub near the window on the 40th floor."  

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