再Stock market, April 5th 2014 P69 (書評ー株式市場)
What can you do in thirteen-thousandths of a second? It is not even enough time to blink your eye. But it does give so-called high-frequency traders (HFTS) enough time to buy and sell shares in today's stock market. Most people would mark down such frenetic trading as a sign of technological progress and forget about it. But Michael Lewis's new book, “Flash Boys”, alleges that this hyperactivity is a sign of how rigged today's markets are against ordinary investors. Mr Lewis recounts how a group spent $300m to lay a cable in the straightest possible line from Chicago to New York, cutting through mountains and under car parks, just so the time taken to send a signal back and forth could be cut from 17 mill-seconds to 13. In return, the group could charge traders $14m a year to use the line. Traders were willing to shell out those fees because those fractions of a second might generate annual profits of $20 billion. That money, Mr Lewis alleges, comes from the pockets of other investors. The problem was first noticed by investors in the middle of the last decade. Suddenly they found that when they placed an order to buy or sell, the market price would move against them. Somebody appeared to be one step ahead. That was the HFTS at work. The HFTS' trading edge comes from two different sources. When an investor presses the button to deal, that signal is sent to a broker or bank, who in turn is supposed to search the many different stock exchanges for the best price. But because of the time taken for trading signals to be sent down the wire, those orders arrive at different stock exchanges at separate times. The HFTS were sitting in wait, and used their advantage to exploit the time differences. Often, the HFTS place buy or sell orders for small amounts at individual exchanges. When those orders get filled, that is a signal that a big investor has a much bigger stake to offload. Sometimes the HFTS' orders are designed not to be filled, but to flush out which way the institutions are planning to trade；HFTS comprise half of all trades on the American market but submit almost 99% of the orders. Perhaps the best analogy is with the people who offer you tasty titbits as you enter the supermarket to entice you to buy；but in this case, as soon as you show appreciation for the goods, they race through the aisles to mark the price up before you can get your trolley to the chosen counter. The second edge comes from the existence of “dark pools”- trading venues set up, usually by banks, that were designed to give investors anonymity. Banks, says Mr Lewis, have been allowing HFTS access to those pools in return for fee, allowing them to prey on unsuspecting investors. The HFTS vigorously counter Mr Lewis's criticisms. One trade body sent out its response before it had even had a chance to read the book. Markets now are much more liquid, they say, and the spread (the gap between buy and sell prices) are lower. But as the author points out, the numbers can be illusory；the average size of trades has fallen sharply. If you have 10,000 shares to sell, the fact that you can sell the first 100 at a tight spread does not help if you are forced to offload the remaining 9,900 shares at a lower price. “Flash Boys”makes a strong case. Whether it will sell as well as two of Mr Lewis's earlier works, “Moneyball” and “Liar's Poker”is unclear. His hero is a former Royal Bank of Canada trader, Brad Katsuyama, who recognised the problems caused by HFTS and set up a trading forum to treat investors fairly, in the face of much industry resistance. But Mr Katsuyama comes across as earnest, rather than colourful, and offers the author few chances to indulge in his trademark humour. Meanwhile the general readers may struggle with the minutiae of stock-trading. As a piece of investigative journalism, the hardback edition of the book has a few holes. There is no index, nor are there any charts or tables to bolster Mr Lewis's case；readers hear very little from the investors whom the author says are being ripped off. If Mr Lewis is right, the victims should start making their voices heard.
