Flash Boys: A Wall Street Revolt

by Michael Lewis

Once you had figured out which broker was behind any given stock market order, you could discern patterns in each broker’s behavior. If you knew which broker had just come into the market with an order to buy 1,000 shares of IBM, you might further guess whether those 1,000 shares were the entire order or a part of a much larger order. You might also guess how the broker might distribute the order among the various exchanges and how much above the current market price for IBM shares the broker might be willing to pay. The HFT guys didn’t need perfect information to make riskless profits; they only needed to skew the odds systematically in their favor. But, as Brad put it, “What you’re looking for ultimately is large brokers who are behaving idiotically with their customers’ orders. That’s the real gold mine.”