The DΨvil in the dΨtail: Is the U.S. stock market rigged?
Wall Street is rigged. At least that’s the premise behind best-selling author Michael Lewis’s latest page-turner, Flash Boys: A Wall Street Revolt (March 21, 2014). In this book, Lewis offers a non-fiction account of how high-frequency traders use a potent combination of advanced computer algorithms and ultra-high speed data networks to gain an edge in the market.
As engaging as Lewis’s new narrative may be, high-frequency trading (HFT) isn’t new; the investment markets have become increasingly automated, especially in the last decade. Nonetheless, Lewis’s recent appearance on 60 Minutes has set off a firestorm of debate about whether HFT is hurting average investors and challenging the integrity of the markets. As Lewis told 60 Minutes interviewer Steve Kroft, “The United States stock market, the most iconic market in global capitalism, is rigged … by a combination of stock exchanges, the big Wall Street banks and high-frequency traders.”
Bernard Donefer Professor at the Department of Statistics and Computer Information Systems at New York’s Baruch College shares his perspective on this issue.