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