Patterson begins his very readable account of how computer nerds changed the process of trading stocks and bonds with Josh Levine, an idealistic programming genius who dreamed of wresting control of the market from the big exchanges that, again and again, gave the giant institutions an advantage over the little guy. Levine created a computerized trading hub named Island where small traders swapped stocks, and over time his invention morphed into a global electronic stock market that sent trillions in capital through a vast jungle of fibre-optic cables.
By then, the market that Levine had sought to fix had turned upside down, birthing secretive exchanges called dark pools and a new species of trading machines that could think, and that seemed, ominously, to be slipping the control of their human masters. Something had to change at the hidebound New York Stock Exchange, which was operating pretty much the way it had been since it was founded next to a buttonwood tree in lower Manhattan in 1792. Something had to change, but Patterson suggests the complete takeover of stock and bond and commodity trading by algorithms understood only by computer geniuses may have been a bridge too far.
He presents his case very convincingly on Page 277: “The architects of the trading technology revolution that took off in the 1990s — Josh Levine, Jerry Putnam, and others — believed they were bringing light to darkness, cracking the powers that be with competition, opening up the market to more transparency, making it easier to trade in the bargain. But the computerization of trading had a perverse side effect. Secret formulas, like the code taken by Goldman programmer Sergey Aleynikov, became the currency of the realm of the new cyberkings of Wall Street”.
Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market
In this debut, this talented journalist deciphers the devious machinations of high tech traders, explaining not only their strategies, but also their roller-coaster effects on global markets. This wonderfully accessible book is both fascinating and eye-opening; who among us, for example, knew that an estimated 95% to 98% of orders generated by high-speed traders are cancelled as the firms react to nanosecond market changes?
‘Scott Patterson has the ability to see things you and I don’t notice.’ Nassim Nicholas Taleb, New York Times bestselling author of Antifragile, Fooled by Randomness and The Black Swan
“An invaluable piece of timely journalism that should be read by regulators and anyone with a cent in the stock market.” (Financial Times)
“A great read . and raises an important question: could the trading machines destroy the capital markets?” (Reuters UK)
“As an exposition of Wall Street nerdcraft, Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market truly delivers … Patterson’s tales of ingenuity and cunning read like a spy novel” (Sunday Business Post)
“Scott Patterson’s Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market is about the most important financial issue no one talks about—how high-frequency traders have rigged the market.” (Mark Cuban)
“Far more comprehensive and persuasive [than even Michael Lewis’ Flashboys].” (James Stewart, New York Times Book Review)
“Remarkable…even long-time participants in electronic markets will learn a lot from this book.” (Forbes)
| Title | Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market |
| Author | Scott Patterson |
| first published | 1st 2012 |
| Publisher | Crown Business |
| ISBN | ASINB006OFHLG6 |
| Language | English |
