Flash Boys is deliberately set up to suggest a “perfect world gone bad” scenario: As if, prior to the advent of HFT, … nobody ever got bad fills and liquidity was provided by a fairy godmother who never skimmed. It is … irresponsible, … dumb and deceptive, … to … talk about HFT without talking about what HFT replaced.
… Why … did floor traders and market makers play a key role in the function of markets for multiple centuries? Because floor traders provide liquidity. Liquidity provision is a service, and it has a cost. A discussion of what HFT replaced—with examination of new systems, old systems, and continuity between the two, with attendant pluses and minuses [would have been better]. Yet for Lewis it barely [merits] a paragraph.
… Liquidity has always been an issue. The more size you want to move, the more of an issue it becomes. There has always been a need for middlemen to provide it, and friction / incentive issues in doing so, ever since the fabled meeting under the Buttonwood tree.
In the late 1980s, the Justice department busted 46 traders and brokers in the Chicago trading pits. The stealing had gotten so bad, the FBI came onto the trading floor.
Flash Boys reveals itself as a tempest in a teapot on pages 52 and 64. (I speak here of the hardcover edition from Amazon.) When Lewis … uses real numbers, the frivolity of his case is revealed.
On page 52 … an HFT “tax” that amounts to $160 million per day on $225 billion worth of volume. That is significantly less than one-tenth of one percent.