What’s the Frequency Zenith?
“All of the expectations didn’t work,” recalls Serge. “They thought they controlled the market, but it was an illusion. Everyone would come into work and were blown away by the fact that they couldn’t control anything at all.... Finance is a gambling game for people who enjoy gambling.” –
Michael Lewis, Flash Boys: A Wall Street Revolt
“I’m shocked, shocked to fnd that gambling
is going on in here!” –
Captain Renault, Casablanca
“If you want to do this, let’s do this.” –
Brad Katsuyama
“I thought I’d pegged you an idiot’s dreamTunnel vision from the outsider’s screenI never understood the frequency” –
R.E.M., “What’s The Frequency, Kenneth?”
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THINGS THAT MAKE YOU GO
Hmmm...
A walk around the fringes of nance
By Grant Williams
14 April 2014
2
THINGS THAT MAKE YOU GO
Hmmm...
14 April 2014
Contents
Ukraine: Truth — The First Casualty ................................................................23
.....................................................24Heartbleed Flaw Described as “Catastrophic” by Experts ......................................26
...............................27
.....................................28
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............................................................................30
...........................33
....................................................................34
3
THINGS THAT MAKE YOU GO
Hmmm...
14 April 2014
Things That Make You Go
Hmmm...
WARNING: This week’s Things That Make You Go Hmmm... is going to run a little longer than usual, I’m afraid, so if you have some time to kill, strap yourself in for the ride. Yes. I have read it.For the last couple of weeks those have been the ve words I have used the most — by a country mile.The second most-used ve-word combination during that time has been “I know, what a tool.”The subject to which the rst group of words pertains is, of course, Michael Lewis’s new book,
Flash Boys
;
and the second phrase refers to a certain president of a certain exchange, who made a complete fool of himself during the erce media debate that has surrounded the
book since it burst upon the public consciousness in the
space of what ironically felt like a few nanoseconds. (The particular piece to which I refer has to be seen to be believed; but if you somehow missed it, you’ll have
your chance. Stick around.)
Now, before we get started, let’s get a few things straight right off the BAT(s).Firstly, I am an enormous fan of Michael Lewis’s work. I think he is an incredible storyteller with a gift for narrative worthy of a place alongside many modern greats. I have read each of his books and enjoyed them all tremendously. Michael has an ability to weave complex subject matter into a tapestry that can be understood and enjoyed by many who might otherwise nd such material utterly incomprehensible.Secondly, I am no expert in high-frequency trading, but I have had some experience of it in recent years; and I have spent some considerable time analyzing it from a business perspective, which has given me a reasonable understanding of its mechanics.Thirdly, whilst I have limited
direct
experience of HFT, I DO have almost thirty years’ hands-on experience of equity, bond, and commodity markets in the US, UK, Singapore, Hong Kong, Australia, and Japan, as well as in another dozen or so countries across Asia Pacic; and having watched markets of all types move in strange ways for seemingly no reason until, a few moments later, the cause of the move revealed itself, I feel I have developed enough of an understanding about how the markets work and, perhaps more importantly, about the people who MAKE them work, to venture an opinion or two about the subjects raised by Michael Lewis
in
Flash Boys.
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