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Flash traders: the stock market is rigged

Much more here.

Michael Lewis’ new book Flash Boys: He says the stock market is rigged.

Kroft: What’s the advantage of speed?

Lewis: I’ll give you an example. If I am just an ordinary trader, at a bank, or an investor in Manhattan, and I’m trying to go buy stock, and I hit a button that says I’m going to buy 10,000 shares of Microsoft that seem to be out there, my trade signal goes up the West Side Highway, out the Lincoln Tunnel and arrives first at an exchange on the other side of the Lincoln Tunnel called the BATS Exchange. There are waiting high-frequency traders who have algorithms that are able to determine what it is I want to do. They then need to beat me to the other exchanges to buy the Microsoft I want to buy and sell it back to me at a higher price.

Kroft: And they’re doing that?

Lewis: They’re doing that. But they not only need to beat me. They need to beat each other. Beating me is easy. I’m just an ordinary investor operating at fairly ordinary speeds. Fast, but not that fast. Whoever’s the fastest to go get the Microsoft at the other exchanges that are scattered across New Jersey will have the advantage and can get them and sell them back to me because I need to buy them.

Kroft: At a higher price?

Lewis: At a higher price.