The Wolf Hunters of Wall Street

How a band of outsiders discovered that the stock market was rigged — and set out to change it.

Comments: 179

  1. Having visited the trading floor it was immediately apparent; it was no Church. Rather it was and is a casino... and the average investor is playing against the house.

  2. Thank goodness for Mr. Katsuyama and his friends. It's great when the good guys can stop the bad guys. Now that's a movie I would like to see.

  3. Great link from times. Excellent article.

  4. "just follow the money".....

  5. This article gives me hope that over time there will be large numbers of the very intelligent people currently on Wall Street leaving to work for a fraction of what they now earn doing more meaningful work. This rather than thriving by creating more and more crumbs to be gathered at the opulent, global table of investing.

  6. Splendid account of stock order procedures. As a trader for my own account, it became apparent that something was amiss when buy/sell orders were always deviant from my offers. Kudos to Brad and his team for this giant step forward.

  7. Many of the problems of Wall St and the nation as a whole can be traced to the Federal Government's subsidization of investment in the form of tax breaks. This has permanently skewed the investment reality, as mortgage subsidies have skewed housing.
    Investments are now overvalued and small investors are either loathe to pull there money or are penalized for doing so. This encourages irresponsible use of OPM... we continue to reap the toxic harvest of a polluted democracy.

  8. This has nothing to do with tax breaks. Grow up.

  9. A fascinating story to "occupy" the minds of Wall Street traders this week.
    Heartening to learn that IEX has created a clean marketplace for Main
    Street folks. Go, Brad.

  10. Ok but how do "main street folks" who trade online get their trades through IEX? Answer: they can't unless they use one of those expensive brokers with high fee's per trade. So in the end, 'main street' gains nothing.

  11. Wow, just wow. Maybe our future is not utterly hopeless.

  12. Just maybe. Thumbs up to those guys.

  13. One of the most interesting financial stories I have read in a while. I have to say I admire RBC and Katsuyama for pursuing this, learning, understanding and providing an option.

    It is a great story about team building and problem solving. It certainly sounds like investors should offer thanks to the IEX team.

    Being a little familiar with the technology of communications it was amazing to see such a simple solution as a delay line being so influential. Time is an amazing topic.

  14. Thank you for a fascinating and enlightening look behind the curtains. It is beguiling how corrupt our system has become. America used to be engaged in the business of creating goods. Banks used to finance facilitate industry and finance factories and equipment. We have outsourced most of our manufacturing to China and elsewhere and this is now how big banks now spend their time and resources.

    The amorality, cunning, greed and deception depicted is stupefying, but typical for Wall Street. Thankfully there is a happy ending for this small band of happy warriors, who tried to do the right thing. I am sure that there is a meeting in some dark hole, high above the streets of Manhattan, and some folks are trying to figure out how to kill the IEX exchange.

  15. Front running by logistical design? Who designed the system? Who was aware of its design and took advantage of it? Who benefited and who didn't? Prosecute, prosecute, prosecute, and return the ill-gotten gains in the form of restitution!

  16. There were no laws being broken. Immoral, unethical, yes, but no criminal. Who took advantage, it sounds like it was mainly a bunch of programmers with "heavy Russian accents". Who does it sound like? (And BTW, aren't those the same people who brought us the 'Quants' and helped bring about the last big collapse?)

  17. Ive got much to learn.

  18. These are the job creators, right? I'm sure a lot of jobs were created by being closer to the Secacus server and undercutting some Kansas City trader. -> Preferred Income in America.

  19. The only jobs they create are snow jobs.

  20. It would seem that HFT is not dead though. After reading this piece, and even watching the 60 mins interview last night, I come away thinking that Lewis focused on a small part of the story. I hope the rest of the book follows the money, (which is not RBC). In other words, who are the High Frequency Traders? They come off sounding too much like robot aliens or a virus, or a couple gangsters, one called Vlad. I suspect it's more sinister than that. In fact, don't be surprised if on one hand the big trading firms and hedge funds are Janus faced--"oh the shock, the horror--good job Mr. Kastsuyama! You go IEX." While on the other hand they (And the establishment) are making money hand over fist and not only know all about this, but support it, and use it to their advantages.

  21. This reads like science fiction of some dystopian future - only it's now. Hard to imagine how the "little people" (as Leona Helmsley described them, the type that pay taxes or might want to do a little investing on their own) would even get into the market knowing about the sharks and the game being likely stacked against them.

  22. Interesting. Very interesting. Some of it went over my head (way over) but the basic idea got through, I think. Long story short: it's easy to tell someone how something *should* be done (fair trades at fair prices), but it's very hard to tell someone how many ways they should *not* do something (game the system with microsecond advantages, for instance.) It's constantly amazing to me how clever unscrupulous people are at finding ways to cheat. I have similar feelings about how many ways people find drugs to abuse. Same idea, I guess.

    And how often do we get to say this: GO CANADA!

  23. How un-American.... and thank god for it.

  24. Ever since Moneyball, I have been a Michael Lewis fan and appreciate his ability to spot people who were whistle blowers or Cassandras in sports or finance.

    I'm hardly surprised to see that a small group of people in the financial world exploited the loopholes or inefficiencies that came along with high speed trading and new complex financial instruments, such as CDOs and CBOs. The financial sector has been given the green light for 30+ years to make money by any means necessary, especially once Glass Steagall was repealed in 1999.

    What's amazing, according to this piece - much like in the Big Short - is that it was clear that most head honchos inside the system had little idea of what was actually going on. Not so surprising when you think of the age of most CEOs and decision makers in the biggest banks, but also that the policy makers were even more in the dark. However since both sides benefitted enough - to the detriment of most of society in the US and around the globe - things were largely left in place.

    Even the financial crisis, which is still far from finished, is mentioned almost as an aside, a sign zoomed by on the highway. Dodd-Frank or any another legislation doesn't even get mentioned here.

    Have we learned nothing since the global economy was turned upside down? Privating gains and socializing losses doesn't work and should be discouraged. Trickle down economics failed. Regulation and accountability are needed for any financial system to work well.

  25. What is not clear is how this is relevant to the average person. So, on other exchanges the traders pay a penny more per share compared to some arbitrary value of the share unrelated to real-world measures. The share value is determined by hype-driven supply and demand as it is and this new method skews that a little so money now flows to a different set of Wall Street people. Once again, how is this relevant to me?

  26. This would make a great follow-up article.

  27. While a penny a share is probably not relevant to the average person, billions of dollars in ill gotten gains might be.

  28. The average player is shut out from the big profits and big returns. The average player isnt even on the radar, so to speak.

  29. Lets stop complaining about Third World corruption...something about a glass house and stone throwing...

  30. Good grief! Thank you for this article, thank you to Brad and his team. As a small day trader who had no impact on anything, I had been trying to roughly understand how high speed trading worked and gave up. And got out.

  31. Having lost at the market for the most part, I am fully convinced that the system is inherently stacked in favor of Wall St - and quite frankly no average person should ever put their hard earned money anywhere near these people.

  32. a trader obsessing on speed
    invisibly sourcing his greed
    is he outed by name?
    it's the end of his game
    the parasite none of us need.

  33. After watching with amazement the "Wolf of Wall Street" last night, I was glued to this incredible story and applaud Brad's team and Lewis for telling it so brilliantly.

  34. Absolutely staggering. Katsuyama and Markopolos, who figured out Madoff's scheme long ago, should be awarded congressional medals of honor.

  35. @Steve
    Perhaps you should take a half hour out of your day and read about some Medal of Honor recipients. I know you meant well but don't trivialize the MoH. Sorry...

  36. That banks and brokers should act in the best interests of their clients, truly a novel idea.

  37. 60 minutes had a report about this subject last night. It didn't surprise or shock me at all. But where is the outrage? Where are the legislators? Where are the laws and regulations to prevent this type of abuse in the future?

  38. You're way behind the 8 ball. The SEC and other regulatory agencies are well aware of all this and investigating many of the firms involved. The trouble is that much of it is legal.

  39. Congress is probably working on a law to assure it is legal and the fab five of supremes want it brought to them as a religious freedom case. After all, I am sure the traders call out the name of Jesus every time they make a killing.

  40. I'm looking at Brad's IEX team, out of 29 people only 3 of them are women. Wall Street needs to change their culture not only by being honest but hiring more women.

  41. There's no evidence women are more honest than men. Two of the five Madoff conspirators found guilty last were women.

  42. Seriously? Hiring women 100% solves dishonesty in the workplace? Egads.

  43. Can't you just allow these amazing young men and their company their moment in the sun? Does every blessed thing have to be about women as victims?

  44. And to think the oligarchy calls Social Security a ponzi scheme.
    (More alarmingly, tens of millions of Americans agree.)

  45. And Michael Lewis has provided us with one more reason why "privatizing" Social Security is a very bad idea for all us little folks.

  46. Social Security is a ponzi scheme.

    Ponzi Scheme: a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.

    Belief in the success of Social Security is fostered by the payment of returns to the first "investors" from money invested by later "investors."

    In other words, Social Security works because the money coming from people currently contributing to it goes to the people who already contributed. The first investors receive money invested by later investors.

    That's a ponzi scheme.

    I'd love from them to dismantle the entire program. Keep whatever money I've already given to you, but don't force me to continue to pay into it. Just call it quits.

  47. 1. No quick returns. Most people pay FICA for at least 40 years before receiving a benefit.
    2. It's not an investment, it's social insurance that has kept every recession from becoming a depression for the past 70 years.
    3. It's not a question of 'belief'.

    I repeat, the ponzi scheme of liars, cheats and quasi-criminal organizations resides on Wall St. and the major banks. A large portion of these criminals should be in jail.

  48. Thank you Michael Lewis for once again boiling down a super complicated story and making it understandable to the lay person. I can't wait to read the book! Bravo Katsuyama and his team!

  49. Truly an excellent excerpt from Michael Lewis' book, which I just ordered. I had known small investors were seen as targets by large banks, muppets to destroy; yet I had figured the big traders were using our collective, typically longer held stocks as a foil to their longs and shorts. It s even more vile and sinister than I had imagined, with intentional marking marking in the midst of a transaction. Entirely corrupt. Most of the CEOs and money gods on Da' Gangsta Street should be incarcerated for long lengths, not the nanoseconds they used to steal.

  50. We would only have to through a few of them in prison in the regular cells for a few years for it to have a chilling effect on Wall Street's ways. They believe they are above the law, and so far, they have been correct. Holder and friends are afraid of them. The worse thing Obama did was turn a blind-eye to the people who caused the Great Recession. We need a Pecora-type investigation. What we got was a textbook example of "moral hazard". "Too big to fail" is also "too big to jail". There will be no healing of anger of the past five years of misery until some of the crooks are in orange jumpsuits.

  51. Proposed: "Capital should be in the hands of the state."

    Discuss.

  52. Necessary resources should be in the hands of the state, like utilities, water, health care, education and the rest. Capital should be tightly regulated and the agencies doing the regulating should be free of interference and fraternizing with the industries they regulated. There should be no insiders hired and no revolving doors. The agencies should be fully staffed as well. One way the GOP achieves the goal of deregulation is to cut federal agency budgets to point that they are not able to handle the workload and then blaming any oversight failure on the agency when it occurs.

  53. What a fascinating read. Shows some are still willing to make the financial world better, more open and also reduce risks. Thumbs up to those guys for wanting a fairer system. As for those big banks, i guess since none of them was made to pay for the last financial meltdown, they don't feel any obligation to be fair in their dealings.

  54. We have the stooges of wall st to blame: people like Alan Greenspan who insisted the markets and banks are self regulation. He takes us all as fools, and contributed greatly to the massive 2008 recession. It's time we insist that no one from the thoroughly corrupt finance world work for government. Instead, install educated, intelligent business people with no experience or ties to the industry, in key areas (lke the Treasury). If they cant understand what's going in the hedge funds, banks and private equity, then stop it, simplify it, and put in on open exchanges for transparency. Complexity and secrecy is a curse that segregates society, perpetuates the unfair status quo, and turns democracy into a plutocracy.

  55. "Business people" are as likely to be corrupted as any other. They are not the gods we like to portray them as.

  56. This was a great article. Kudos to the IEX team and to NY times reporting.

  57. Thank god for Brad Katsuyama and Michael Lewis, and for the New York Times for publishing this excellent piece. How depressing that securities fraud -- because that's what this is fundamentally about -- continues unabated. Clearly, there is something in (male) DNA that drives these grotesque, win-at-all-costs behaviors. But at least there are a few people, like Brad Katsuyama, with a shred of morality left. Can't say the same for our lawmakers . . .

  58. No, this makes it plain there is something in Wall St DNA that promotes that kind of behavior. The Canadian guy didn't come from that culture - and his bank from Canada was willing to spend money and give up short-term gain to learn what was going on. Wall Streeters accustomed to being rewarded ONLY for short-term gain were perfectly incentivized to participate in the schemes, or at least never to put in the time to figure it out. We need a rehaul of that whole culture.

  59. I have to disagree with Sue below. RBC was never making money from high-speed trading or black pools. They were spending money to find out why their competition was beating them, not because they wanted to fix the system. Likewise, Katsuyama's motives are by no means purely disinterested. If IEX does well he will do well. Hopefully IEX will do well in a way which makes the market more rational. Indeed, hopefully IEX won't itself become corrupt.

  60. really well written and engaging. can't wait to read the whole book now

  61. Wall Street simply "sees" the rest of us, the general public, as "marks".

    So they solved this problem, how many others are out there corrupting the system that none of us, even the smart guys, are even aware exist ?

    "Rules are made to skirted (broken?)" seems to be Wall Street's and the "too big to fail" banks mantra.

    When greed trumps integrity the system is destined to fail.

  62. A fantastic, in depth, weighty article. Perhaps, as a society, we can begin to reward fair dealing, fairly, and to turn the market from a dark, rigged casino, understood by few, and trusted by none, into a board that is above board, to the ultimate profit of all. Those fine young men deserve our business, our trust, and our thanks.

  63. Let's be clear. This is not investigative journalism by NYTimes (nor WSJ, Bloomberg etc...) This is one guy, Michel Lewis, beating the entire media industry to document history.

  64. Fantastic article. Almost every nanosecond trade is a short term trade. In an unsheltered, taxable account those trades would be subject to high, short term capital gains rates which would act as as a brake on this type of trading. The growth of sheltered 401K accounts and IRA's as pensions have disappeared has made short term, untaxed trading far more prevalent. The only rational approach for the retail investor is to focus on the long term, maximize low tax qualified dividends by holding stocks fora year or more and avoid the daily froth of the markets. Warren Buffet famously said that his preferred holding time for a stock is forever. Amen.

  65. How do i find out if my broker is using IEX when I trade?

  66. Whistleblowers or traitors? Did these guys betray our exceptionalism or, worse, our national security? Will they be hunted down and prosecuted to the full extent of the law? Damon, Bloomberg, Holder, King, Rogers, Clapper, Alexander, among numerous talking heads and upholders of law and transparency, let's hear it.

  67. This is the best "lecture" I have ever "attended". Even I could see the pieces falling into place as the RBC flash boys brilliantly tracked down the nanoseconds. Most elegantly brilliant of all -- by my book -- was Cape's idea simply to coil the optical wire to create the transmission distance needed to outsmart the smarties.
    Amazing.

  68. Ditto. Ditto. And ditto. Brilliant!

  69. 60 Minutes ran an abbreviated version of this story last night. Brad comes avross just as you'd hope- a really good guy.
    They filmed the coiled fiber optic cable - what ingenuity.

  70. I can see the traders now, desperately strategizing to dispel the constant drum beat of evidence that the fix is in. And they claim to wonder why so much retail money stays out of the market.

  71. I'm still pondering the guy walking around with a bat in his hands. That sure says a lot about the culture he promoted.

  72. It reminded me of the scene from The Untouchables, where Robert De Niro was walking around with a baseball bat (finally smashing a colleague's skull) in the meeting room.

  73. KK, EXACTLY what I was thinking.
    "It's all about teamwork", before DeNiro bashed the guys skull in.

  74. The guy has delusions of adequacy.

  75. this is a great article on the nature of high speed trading.

  76. Like Claude Rains, I'm utterly shocked
    That fair market dealing is mocked,
    How blokes have been itchin'
    To rig a thieves kitchen,
    Bit late for the door to be locked!

  77. Fantastic story and it touches everybody who has a 401k. Since 2011, seems to me, Goldman Sachs hasn't seen the insane profitability of previous years, but my 401K is doing better. Could that be that it has become more difficult for Goldman to skim from everybody else in the market?

  78. Tom, I think this is a hasty conclusion. One thing this article does not do is tell us how much was being skimmed. I'm not sure anyone knows. The only number mentioned in the CBS report is a hedge fund that thought it was losing $300M annually to this practice. But that report doesn't tell us the denominator to go with this numerator.

  79. Stock trading didnt always used to be this way, for those who are younger:

    There's a whole generation of post-ww2-era retirees still alive today who remember how stocks and stock markets functioned in the USA 1940's-80s. It was of course a kind of gambling then too, but there were reliable dividends and longer range safe bets for the upper-middle classes to invest in. GE comes to mind as the quintessential 1960's stock.

    This article describes just how very far the 21st Century stock market has veered from those days. It might as well be called something different than "Stock Market." "Rigged Stock Casino" is sadly closer to the truth.

    The entire system of buying and selling electronically can be exploited based on network delays. And the select few who know of it, exploited it for profit.

    Some comments here are awfully blase about the larger ramifications of the facts in the article. And that is why so very little will change.

  80. Nobody is going to provide market liquidity for free.

    Back in the old days, when stocks were traded on the exchange floor, the specialist ruled and he charged 1/8 of a point to provide liquidity. These guys risked their own capital to create markets, but in practice they made a nice living because of their pricing.

    Now, these high-speed traders are providing liquidity at a cost of less than 1 cent. If you enter a market order in a heavily-traded stock, you will get around the market price. It is cheaper than ever to buy and sell stock, so what do you want.

    I have been buying and selling individual stocks for more than 20 years, and I know low transaction costs when I see them.

  81. So front running is liquidity??? So placing orders and then canceling them for price discovery is providing liquidity???

  82. "liquidity?" That tired WS cliche that is worth paying arm and leg for? Move on . . .

  83. You're kidding, right?
    I have been with the same Wall Street firm since 1985 (and an honest one, at that), and the specialists were the biggest crooks around.
    Talk about front running.
    These guys got to see your order before the public, and act on it.
    Which means they could manipulate their book however they wanted in order to skim.

  84. What a FANTASTIC article.

    Thank you New York Times!

  85. I can think of only one word to describe Wall St. And the double dealing jackals who inhabit it: Fetid!

  86. This is a real victory - for too long the markets have been debased by investment in rigging the system rather than focusing capital to where it should go. Market credibility just took a turn for the better with this wonderful group.

  87. The fact that the SEC stood by and allowed this travesty in the first place says a lot about their attitude to enforcement. Witness yet the three-day settlement rule for trades that transact in less than the blink of an eye. The SEC is a dinosaur cop walking a Bladerunner beat. Grabbing up the slowest players on the battlefield. Handing out 'naked long' suspensions to the hapless retailers who try to use their money too soon.
    And all the while the whiz kids are skittering by in their jet packs, skimming billions off the top.

  88. I wonder if Mr. Katsuyama would consider heading up the SEC? Or, perhaps more to the point, I wonder if politicians would ignore big-money lobbyists and hire him.... ?

  89. What's shocking to me is a few paragraphs in I said to myself, "Why not funnel the trades through a single place and set the delay, eliminating speed." I'm not in finance and my personal livelihood is only somewhat dependent on the inner workings of technology. In other words, I'm no genius who would be tapped to fix uber complex problems in the financial sector.

    The answer was obvious but the system is so amoral (at best) that it took a guy from outside of the culture of Wall Street laced with a bit of naivety and grit to shoe string it together with minimal resources. This should have happened via government involvement by 2009 at the latest.

    In any event, congratulations to Katsuyama and his team for success, the right way. I wish you many years of being a beacon of light in the market and I hope your legacy controls keep you as that light for my children's, children's, children.

  90. With any luck, this will put all those high volume front-running shops right out of business. Maybe those newly unemployed folks can put their considerable talents to actual productive uses.

    Sadly, they will most likely just look for some other inefficiency to exploit...

  91. This is why you buy a political party or two,,, so you can "tax" your way well into the 1%... Aluminum... check,,, Stocks,,, check....Oil,,,, check...Gasoline... check. Corruption... that's the word for it, Not Capitalism. Thanks Goldman Sachs, Citigroup, AIG and every hedge fund tool.

  92. Why should I not think that there is someone else just as cagey, just as knowledgeable out there right now, reading this, and about to put in place a system to frustrate this one? I don't trust these guys any more than I do Goldman Sachs.

  93. Who among us hasn't thought that maybe, just maybe, this was the case?

  94. I worked as a contractor for an honest, publicly-trade company that was almost shorted out of existence by this monstrous system. Who would start one today, when all its value can be sucked out by high-frequency traders who profit on every price move? Talk about being able to burn your neighbor's house down!

    Having been there, I have nothing positive to say for what Wall Street has become. If the United States is about industry, we are literally lost.

  95. Hmm....tapping into high speed data transmission lines to gain inside information and use it for competitive advantage ? Sounds like it's not only the NSA we have to worry about! Kudos for another strong does of investigative journalism.

  96. The most successful sort of thief is one who leaves the victim with the impression that they're the one who made out better in the deal.

    That's why it continued -- the victims were sure they were making money. As Lewis said, nobody, not even the victims, wanted it to stop.

    The high-frequency trading con is a very old one, just with shinier gadgets.

  97. I smell a Nobel prize...Bravo Katsuyama and your dedicated team of geniuses!

  98. Many thanks to Brad Katsuyama for doing good and persevering, and to those who followed his lead. Despite all the consolidation of wealth and power, it's amazing what one unknown, good, and well-intentioned person can accomplish in this world.

  99. About the Goldman Sachs trade at "3:09.42 p.m. 662 milliseconds 361 microseconds 406 nanoseconds": this is a very awkward construction, and I suspect you meant to say 9 minutes and 42+ seconds, not 9.42 minutes as you wrote. It would have been much cleaner simply to say 3:09:42.662361406

  100. Now to get the public to understand that universal spying is hording information against them and not for the purpose of catch terrorists and criminals.

  101. An extraordinary tale - as much for the revelation of the holes in our stock market trading system that are being exploited as the unlikeliness of the men who discovered and sought to fix them. Thank you, Mr. Katsuyama and your team.

  102. Michael Lewis has done it again. He has managed to keep my interest and help me understand monumentally important things that effect our daily lives despite the many obstacles in my brain. The world's economy has been trashed by bonehead kids and their stupid, selfish leaders. It is time to stop it and put the interest of the people first. Thanks Michael for being part of this process.

  103. Question of what the regulators are doing. Are they regulators or collaborators with Wall Street!!

  104. Back 10 years ago I did some modest Day-Trading and saw some things that confused me. But I had no one to ask and knew that I did not know much about the market. Having read this article I understand that my trades were supporting a lot of different people with huge IT budgets. I lost a little potential profits, not a big deal.
    The big deal is why would anyone trust US companies. Would you eat a package of hotdogs from China? Would you buy a financial tool from Goldman Sax after the pain Greece has gone through? Who can you trust?

  105. High Speed Trading, In-insider trading, hidden fees on 401Ks, bankruptcy law that puts pension funds on the financial operating table, hedge funds that advocate to destroy unions while they get huge fees from managing public pension funds, tax code that is actually written by billionaires….

    We do not have a market place or an invisible hand. They are taking our piggy-banks and selling us snake oil. And its all legal.

  106. Stock trading is a scam- OH NO Say it ain't so. Anyone who did not figure this out decades ago, truly is the Barnum sucker of infamy. Investment banks make billions regardless of whether the market goes up or down- every wonder why sucker??

  107. I would love to find out who exactly are theses high frequency traders who are ripping us all off. I understand that this type of trading might be legal but it would still be interesting to find out who exactly is benefitting from this unethical behavior.

  108. I have known for years, since my first tour of a data center, that my tiny trades of a few thousand dollars were at severe disadvantage when I was in the same market with the microsecond traders and computer robo-trading. And I had discussed the possibility that someone might rig the system, if they had not already. Today the NYTimes shows they already had. Stories like this are why I subscribe.

    Human trading needs to occur in markets parallel to but separate from auto-trading markets in which competing computer algorithms battle in nano-second quick-draw contests. I still want to e-trade online, but I want to play 'market chess' against other humans on human timescales. Kasparov did not beat Deep Blue (1997) overall, and neither can I.

    Separate human markets and you solve many or most of these problems.

  109. Requiring all trades to be routed through optical delay lines owned and operated by the new Consumer Protection Agency just might wring the corruption out of the stock markets. Truly level the playing field! Slow and steady.

    This gives a whole new meaning to the idea of fair trade(s). It might even catch on.

  110. From my book Debunk the Myths in Investing (amazon), I do not believe HFT has an edge over the retail investors. Just do not use market orders. Despite their current profits, they're waiting for a black swan event to wipe them out.

  111. What's important is that electronic voting is safe, trustworthy, and can't be gamed.

    Yup. Safe. And trustworthy.

  112. Today it is very hard for a "regular person" to find a place to put their money that is both understandable and honest. Unfortunately legality and honesty do not live in the same universe any longer.

  113. Leave it to Michael Lewis to explain something so arcane in an interesting manner. This adaptation must be leaving out some of his more colorful phrases but I do like: "a fair impression of a Dublin handyman."

  114. Great article and search for the 60 Minutes segment that aired March 30, 2014.

    The stock market is still rigged by the way.

  115. Few things are as powerful and shocking as an honest, knowledgeable person sharing the observation that the emperor is actually naked.

  116. I love this comment but that is not actually what happened here.

    They had to be very cagey about what they were revealing to the banks and trader execs. Hence they said "we think there's a latency issue in the system as built" and then wait for the chips to fall where they may.

  117. To K Henderson: True, but when they said "We think there's a latency issue....," they were also saying "The emperor's not wearing any clothes."

  118. Actually many of the folks (but not all) he was talking to already knew the emperor was naked and were actively exploiting the issue.

    That was my point though I didnt express it well.

  119. "Goldman wanted nothing to do with the bad things happening in the stock market" LOL, seriously? Some of the best and brightest talent in high frequency trading are employed by GS. Now that the game is up they can claim to take the moral high road?

  120. John,some of the best & brightest talents for high frequency trading employed by GS et al likes predatory thugs running WS can never walk on moral high ground. The sorry part of modern age weirded computerized talent has been sucked into greed by WS vultures & unless they stop selling their souls for greed,vultures will prevail. Bravo to this trio who did great job & deserve our congratulations.

  121. Back in the 1990s during the first tech boom, I did ome trading through some well know money-management firms. I have no idea who was executing those trades. But I did notice a disturbing trend that I simply took as one of the pitfalls of being the little guy. Whenever I called in a sell order to my guy, I would receive a confirmation of the price ALWAYS just a little less than the price we stated. And when I bought stock, the confirmed price was ALWAYS just a little higher. When I asked my guy about it, he would inevitably say the market moved. I suspected they were prioritizing trades to give the best prices to their preferred investors.

    Interesting that technology allows this to happen on an industrial scale, and everyone - from the small traders to the former wolves of wall street - have all become sheep.

  122. In the digital age, power is all about *direct* access to the system.

  123. Heard on the news, a few weeks back, that some high speed traders want to put up some kind of above ground nano,nano laser beam system on buildings because it will transmit trades faster than the in the ground cables and shave off more time.
    Maybe its to get around the 38 mile coil fiber optic delay box?

    Wow,

  124. How can we ever thank Brad Katsuyama? He is a true hero who may save the world economy from predatory greedsters on Wall Street. Now, Congress, pass laws against dark pools and the other devious methods traders have devised to steal from us. Reinstate Glass-Steagall and make it even stronger.

  125. The story is fascinating, but scam rather opaque for a non-expert. How about a simple routing chart or algorithm that visually depicts exactly how high-speed traders take advantage of an individual buy or sell order?

  126. Those familiar with IT have been all but certain this type of thing has grown up with computerized trading. Still, it wonderful to see some people working to root it out.

    However, that effort will be futile as long as for profit companies are the market makers. The federal government should provide an electronic market for trading public owned securities. Computers make this possible at relatively small expense. Only a 3rd party like the government, could offer an exchange free of technological advantages to particular players. By forcing a time granularity to all events, high speed trading and other time based corruption would be eliminated. The "black boxes" of the private markets makers would vanish. A large proportion of the parasitic feeding by wall street firms off the real economy would be cured. With equal opportunity for all money, the national stock exchange would be more of a real "free market". Since computers now exists, this is a natural role only the government could properly fill, - like national defense or fire departments.

  127. Excellent article. I wouldn't expect anything less from Michael Lewis who also wrote the fabulous 'The New New Thing'.
    The tenacity of Katsuyama and his people exceeds amazing.
    In all, great reporting on some brilliant work.

  128. This morning, only a few hours after this story was shown on 60 minutes, the CNBC early morning crew was right there talking about how this was no big deal--minimizing the effect of the high speed trading issues. Led by Joe Kernan, all three hosts said it was no big deal because the trading advantage used by some firms only got them pennies on trades. I'm used to hearing the CNBC hosts shill for Wall Street all day long, but I expected that they were capable of math--not even higher math, but basic arithmetic. As Senator Dirkson said a while ago: a billion here, a billon there, it starts to add up. Just more drivel from the crew that shills for all major players of the financial world, but can't imagine how it affects the tens of millions of little people screwed over on a mortgage or on their retirement accounts. No, let's bail out the big guys and minimize their malfeasance and corruption. Don't these guys have a conscience?

  129. No. No, they don't have a conscience. That's an easy one.

  130. If ever there was Any doubt about who the targets of DOJ investigations should be, this article should alleviate any guilt or hesitancy in following thru with investigations and indictments. We have very smart people following electronic trails and very smart people who track criminals. By now there is so much in the public domain about how this theft and manipulation worked, it should be like tracking bleeding elephants in the snow. Hook them up.

  131. I'm somewhat embarrassed to admit that I work for a large global bank that is chock full of that Wall Street mentality.
    I'm heartened that there are individuals out there with a moral compass who are willing to do something to tackle one of the many problems that result from the hubris of Wall Street.

  132. Trust and transparency? Can it really foil the stock-market predators? Or is it just another challenge they'll put their avaricious minds to?

  133. Something corrupt on Wall Street? The hell you say...For those of us that only know Wall street as a term, it is viewed as the epitome of evil. I would believe anything bad about the money grubbers on Wall street. I find it laughable that we pretend to be interested in these "findings" or the antics of the super rich,greedy,money manipulators. Wake up and understand that those guys can and do kill people over money,they cause finical ruin on thousands just for profit and they are so far removed from reality that they may as well be aliens to this planet. By just walking into that building you are bad for my country and way of life just by default. :) By the same token, if Wall street collapsed tomorrow, I would not care or miss them a bit. I am so happy that things like Wall Street are not in my life except in my morning reading.

  134. Seems to prove that the past "leadership" of the NYSE was concerned more with their compensation than the future of the organization and basic concepts of fairness.

  135. Stock Market is rigged?! This is news?! If Mr. Lewis or the Times were to ask any thoughtful bloke who has worked in the Operations areas of Wall Street (those so called and looked down upon departments of Wall Street called the Back Office where the overwhelming majority of workers in the industry toil and actually know the show!) in the past seventy five years, especially those who have worked in the Margin or Purchase and Sales Departments, as I did for nineteen years, you would have been told the same thing! ( Without the glamour, media hype, or need to resort to ask a few twentysomethings who have never worked long in the industry...).

  136. What a great article, and kudos to the NYT for allocating the space needed to tell a complicated story well.

  137. Will the people who lost money due to this have their day in the court. Sue those high speed traders out of business.

  138. If you get a chance, read "Enough" by John Bogle, the founder of Vanguard funds.

    He made the point, among many others, that Finance is the one of the few, if not the only, industry where the benefits of innovation inure to the industry (ie firms) and not its clients (investors).

    Wall Street is rigged in too many ways.

  139. Wall Street is, and has forever ever been, dependent on the greater fool, nothing else could cause the consistent rise. Bernie Madoff knowing this played it as a single. The Giants, too well known and too extensive to list here, were bailed out. Wall street is a casino: stacked decks and rigged tables. Regulators, GM is a recent example... all know what their job really is...facilitate. Pope Francis was right, the free market and capitalism need a complete overhaul.

    These Wolf Hunters have a job much easier than they think; just expose the beasts and watch the people come out with pitch forks and torches.

    We obviously have no reason to have any faith in the Attorney General, or regulators.

  140. Great story.

    Apparently, Adam Smith's 'Invisible Hand' -- you know, that unseen force of the market "whereby competition channels ambition toward socially desirable ends" -- must have been on an extended vacation.

    Or maybe it was always a fantasy used to keep the suckers in line.

  141. I think your second conjecture is correct. Will we Americans ever rise up? I used to think it was an insane idea because the US Military would crush people like ants. But now I'm beginning to think it would be worth the fight. Just to say we tried.

  142. The crooks will always put the honest people out of business. Eventually, you end up with nothing but crooks.

    If they are into this level of fraud, you have to figure they are doing everything else possible to steal your money.

    The stock exchange is obviously not capable of policing itself.

  143. I remember my grandfather, the labor socialist from Schenectady, telling my grandmother the Lincoln Republican from Chataqua, NY, that
    "to put your money in the stock market, is like betting on a race horse"!
    That was 60 years ago and it has taken that amount of time for many people to come to the same bloody conclusion!
    Wall St. is an amoral , unethical collections of predatory thieves, knaves and avaricious predators!

  144. Wow, pretty astonishing. RBC allowed Katsuyama's team to lose up to $10,000 a day. It took one man and one bank to look beyond making money to do what is right. A far cry from what I heard about a screening of the film 'Wolf of Wall Street' to bankers on wall street. Belfort was portrayed as a villain but those watching the film cheered at his illegal and immoral behavior.

  145. When election of our politicians at all levels of government are paid for by we the people with a controlled amount of public funds instead of the pay-to-play money of billionaires, then we will own our government and it will serve our best interests.

    All these articles about the average American getting screwed (from Wall Street to health care costs to tax prefs for the rich) are a symptom of government owned by and serving those with private campaign cash.

    That's the cause. Everything else is just the result.
    When we demand our legislators sign a pledge to back a constitutional ammendment to end private campaign contributions we will own our government again. We're one ammendment away from ending the madness. It's that simple.

  146. The only question I have is "How do I become a Wolf hunter too?"

    And believe me, unlike Mr. Ryan, I would have no trouble with being enamored of the Wall St. guys...they deserve the contempt of every decent person out there, their shameless gambling with others money is disgusting, they've built Frankenstein systems they themselves don't understand.

  147. Financial Terrorism?

    Who are these "high frequency" traders?
    Are they working on another strategy to outwit the rest of us or will IEX put them out of business?
    And why is there only one woman (two?) in the photo of the IEX team?

    Katsuyama did a brilliant job and the Royal Bank of Canada deserves a lot of credit for giving Brad the support he needed to solve this incredibly complicated and costly puzzle.

  148. As usual a Michael Lewis tour de force

    HST and other wolves (aka the Wall St mob) will always find a way to extract their vigorish via inside information.

    Brad Katsuyama for SEC Chairman.

  149. Common sense+inquiring minds+ingenuity+ethical motive= breaking the paradigm of gaming Wall Street trading systems. Hooray!

  150. So, why isn't this "news" on every front page, every website, every TV show, and every political press conference in the nation? Why aren't there congressional hearings, presidential speeches, an outraged outcry for reform?

    Ok, I know, I know.... The politicians are all corrupt and in the pockets of Wall Street anyway. The people are too stupid, too ignorant. The media controls our brains. Nobody really cares. This business of high speed traders working out of server rooms in remote parts of the country is not really news. It's been around for years and has been reported on for years. If Americans will just sit by and let themselves be ripped off as a matter of routine and do nothing to stop it, well, then, what hope is there for any of us? Why do we even bother to report this?

  151. While I will most defnitely be reading the book, I would be curious to see what happens when a large institutional investor finds out that their specific requests are not attended to? I'm guessing this is part of the reason for RBC's ascendancy as Wall Street's bank of choice for the big players.

  152. Why don't we just set a five minute cap on trades and do it in bursts? I mean, that's what the stock market is there for: to match those who have money left over after they pay their bills to businesses who need money to smooth out expenses or grow. Those business needs may change from day to day, but not microsecond to microsecond. Those who worry about high frequency trading are really just gaming the system, and not fulfilling the capitalistic mission of the stock market. They're profiteering on side bets and sapping money from the good work that could be done in a robust economy.

  153. You just move the goalpost to being the last orders in under the 5 minute cap.

  154. Darkpool - more corruption of the language. One would have thought that after the spectacle of Enron that catchy names for institutionalized theft would have been avoided by the banksters - recall Raptor?

    Darkpool is at least aptly named. But just call it the cesspool, since that's what it really is. Thor it!

  155. What a surprise. The free market is a big casino rung by mobsters in suits. How about we start putting people into jail? How about someone stepping up and undoing the Big Casino so that all investors play by the same rules with the same chances? How about we stop allowing a few sociopaths and psychopaths determine the lives of others just so the maniacs can hoard more wealth? What does it take to fins some honest people in the industry and the government and private regulators? Have we all become workers in the concentration camp we claim to love? Why is Bernie Madoff in jail but not the rest of the bankers, hedge fund owners, etc. cheating the rest of us?

  156. How do RICO charges not apply to put dozens of the 'banksters' in jails that throw away the keys?

  157. Interesting that 60 Minutes ran this piece last night and--like the Times--did not identify the bad guys.

    Nobody has offered a reason why market liquidity would be impacted if all recipients had a one second delay. That would simply make stocks less volatile and less under the sway of computerized trading scavengers. The SEC should mandate it.

  158. We need a lot more articles like this bearing good news and showcasing the earnest men and women tackling the problems doing us in and actually coming up with workable solutions. Who knows, with enough attention, this kind of story could become the norm.

    It was interesting too how Katsuyama went about dealing with the people involved--both the good and and the ugly.

  159. Canadian nice is real. Having to deal with large contractors building huge hospitals was a learning experience. The worst contractors were from Chicago - what rapacious expl del.

    Having lived in NYC and been directly exposed to walls street traders all I can say is - Brad got it right. During the first gold run up, I made a lot of money buying ADR's for Durban Deep. Recently I contracted a large wall street firm whom I have done business with before - let's call them the stumbling herd and asked them about Durban Deep. Great opportunity their sales rep said. The most recent news was of 2 of their miners living in the offices of their now closed facility in SA getting killed in a shoot out. BTW now the whole of Durban Deep is now bankrupt. I only ask for a stock salesman's advice when I want to have some fun with the idiots.

    Brad really got into the guts of how wall street is ran for the benefit of the people running the market. Hopefully the federal DA in NY will get the most agregious of these people to pay for their crooked past. BTW not a person associated with the almost world financial meltdown has spent a day in jail.

    This is why I read the NYT - the best and brightest work here ranging from food to finance. Have been a reader for over 40 years and it is the first site I open every morning.

    Keep it up NYT - love you and what you do for the world.

  160. Do they really need to be photographed in such a way that they appear to be gods?

  161. We owe far more to Canada than we can imagine.

  162. I hope Brad Katsuyama becomes filthy stinking rich. He will both deserve every penny, would probably give a lot of it away, and would make damn sure that the money he did give away was used effectively and efficiently.

  163. The author is also featured today on Channel 2 news in New York. Coincidence, or PR blitz for a book?

  164. Of course it is a PR blitz for a book. That's perfectly legal. Hopefully, it will also prompt regulators and prosecutors to get off their duffs. If this isn't illegal, I have to wonder how much other stuff is going on while the SEC sleeps.

  165. I think his appearance on 60 minutes helped in that.

  166. Anytime Michael Lewis comes out with a new book, it's a mega-managed media event. 60 Minutes (last night) The New York Times (today) Fresh Air (tomorrow) and all Michael all the time for the next few days....impressive.

    You have to give props to his media management skills / PR team as well as his writing...he's a master of the (media) universe...

  167. Michael Lewis does it again--wow! Now, what I want to know is--how do you get Katsuyamas? It seems like 99.99% of people are simply willing to perpetuate and profit from an unethical system. How do you get the Brad Katsuyama who says, "It doesn't have to be this way: it can be better and ethical"?

  168. Exactly the comment I would like to have written. As in this bit from the article:

    "The best way to manage people, he [Katsuyama] thought, was to persuade them that you were good for their careers. He further believed that the only way to get people to believe that you were good for their careers was actually to be good for their careers."

  169. We could reward ethical people, rather than firing them as whistleblowers, and we could penalize unethical people; but that would require a change in culture starting at the top, and I doubt if all the unethical people profiting obscenely from the unethical system are going to allow that to happen.

  170. Goes to show that individuals need to play the long game. We'll never win the short game, but if you can identify long-term trends and buy & hold... the tiny premium we pay on the transaction ends up a rounding error.

  171. Powerful piece of reporting on an important subject; HOWEVER, it should have been apparent to anyone who thought about high speed trading for a minute or two, that allowing this allowing this unfairly stacked the entire stock market in favor of the 0.1% who can afford a supercomputer, a staff of programmers, and a fiber optic highway directly into Wall Street.
    Where were the regulators?
    Why is this still legal?
    The cure is painfully simple. A 38 mile fiber optic cable is a good start, and having an apparently honest, uncompromised exchange [for now] is nice; however, a simple step like requiring a one second delay, or [gasp] a one day delay like the rest of us have would eliminate this - OR a one cent tax [gasp] on each share, OR - an almost endless list of possibilities.
    This is a terrible indictment of the non-regulating "regulators".

  172. One cent? Its been attempted in thew Senate but I will give you toe guesses who killed it? Not Cruz or Paul or any GOP, maybe one or two who disliked it, but NY and NJ Dems. Schumer and Menendez. Who happen to take in many dollars from Wall Street.

  173. Ultimately to level the playing field as far as the "latency" problem is concerned, a stock exchange needs to be virtually equidistant to all brokerages, which means in outer space. Right now that is not feasible because of the tons of cable and servers and computers needed to support the system. But 20 years from now, if we are not yet inundated, and with nanotechnology, it will be possible to have an exchange floating in space at a fixed point, say, about the size of a basketball, or maybe at worst, an exercise ball. OK, maybe a refrigerator. And of course it would be solar powered. The biggest single problem would be system security, namely, hack-proofing it.

  174. And it would be called area 51?

  175. $1.5 million a year to hit ENTER? Is that job still available?

  176. The stock symbols before the Enter key.

  177. You know the old joke- "It's $1 to push the button and $1,499,999 for knowing which button to push."

  178. Mr. Lewis, you write: "Taking advantage of loopholes in some well-meaning regulation introduced in the mid-2000s, some large amount of what Wall Street had been doing with technology was simply so someone inside the financial markets would know something that the outside world did not."

    What exact legislation are you referring to? What exact loop holes? And who exactly put those loop holes in the bill? Name names.