Tags: Lewis | stock | market | high-frequency trading

Michael Lewis: Stock Market Still Rigged

By    |   Monday, 16 March 2015 07:00 AM

Financial author Michael Lewis sparked great controversy last year with his book "Flash Boys," in which he claims that the stock market is rigged by high-frequency traders.
 
While many experts took issue with that claim, Lewis isn't backing down a year later. "The rigging of the stock market cannot be dismissed as a dispute between rich hedge-fund guys and clever techies," Lewis writes in the April issue of Vanity Fair.
 
"It's not even the case that the little guy trading in underpants in his basement is immune to its costs."
 
It's no wonder that the book ruffled more than a few feathers, Lewis says. "The 'Flash Boys' story put in jeopardy billions of dollars of Wall Street profits and a way of financial life."
 
But there's no reason to "doubt the existence of the Invisible Scalp" of investors' profits, Lewis writes.
 
Plenty of financial luminaries have disputed Lewis' contention that high-frequency trading hurts the little guy.
 
"Look, it's entirely rigged . . . if you trade 50 times a day," said CNBC commentator Jim Cramer. "These people are going to take a little bit of your vig [winnings]. But if you are out there trying to find the next Google, they're not really going to impact you."
 
High-speed trading is "unfair" to daytraders, but normal individual investors shouldn't be daytrading anyway, Cramer noted. "If you're playing this game at home and you're trying to beat these guys, forget it. That's not the right game."
 
Legendary investor Warren Buffett, CEO of Berkshire Hathaway, says high-frequency trading creates no value for the economy, but it doesn't hurt small investors. "They've never had it so good and high-frequency trading doesn't cost them a penny probably," he told CNBC.
 
Hedge fund luminary Clifford Asness, managing principal of AQR Capital Management, believes high-frequency trading actually helps individual investors.
 
"Their small orders are a perfect match for today's narrow bid-offer spread, small average-trade-size market," he wrote in The Wall Street Journal. "For the first time in history, Main Street might have it rigged against Wall Street."

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Financial author Michael Lewis sparked great controversy last year with his book "Flash Boys," in which he claims that the stock market is rigged by high-frequency traders.
Lewis, stock, market, high-frequency trading
344
2015-00-16
Monday, 16 March 2015 07:00 AM
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