Summary of Flash Boys: by Michael Lewis | Includes Analysis

By Instaread Summaries

This is an Instaread Summary of Flash Boys: A Wall Street Revolt by Michael Lewis

With Instaread Summaries, you can get the summary of a book in 30 minutes or less. We read every chapter, summarize and analyze it for your convenience. 

Below is a preview of the earlier sections of the summary:

• Language: English
• Publisher: Instaread, Inc
• Release date: May 18, 2016
• ISBN: 9781683782254

Book preview

Overview

Flash Boys: A Wall Street Revolt is a book written by best-selling author Michael Lewis. This book chronicles the work of one group of men attempting to change the current state of Wall Street trading.

When the stock market crash took place in 1987, many brokers refused to answer their phones to avoid having to buy stock, preventing small investors from entering their orders into the market. To keep this from happening again, the Securities and Exchange Commission (SEC) instituted a rule that allowed investors to make trades with a simple push of a button on their computer. This rule changed the way in which trades were made and led to the automation of Wall Street.

Over time, a specific group of traders became aware that when one broker sent an order to multiple stock exchanges, the orders would arrive at different times. This lapse in time between the first order and the remaining orders gave a fast trader a flash peek at the future of the stock market. This trader could then use this information to make trades ahead of the change. These traders are called high-frequency traders.

Brad Katsuyama was a trader with Royal Bank of Canada (RBC). After RBC bought an electronic trading firm, Brad began to notice that the stock market on his trading machine was not always accurate to the actual market. This caused RBC to lose millions of dollars a year because of the change in prices of the shares they were attempting to trade. Brad initially thought it was a computer problem, but eventually discovered that it had something to do with the market as a whole.

As Brad investigated the problem with his trades, he began to learn about the new breed of traders. Brad discovered that the reason the market appeared to change in the seconds it took him to initiate a trade was because the trade order was arriving at multiple stock exchanges at different times, giving high-frequency traders the chance to make trades in anticipation of the trades Brad was ordering. Brad wanted to learn more about these traders, but discovered that few people knew anything about them.

Brad gathered together a team of programmers and technologists to help him figure out high-frequency trade (HFT). The team developed a computer program, called Thor, that allowed the trade orders to arrive at the stock exchanges at the same time. However, they soon realized that the banks and brokerages that should have benefited