The Flash Boys By Micheal Lewis

1988 Words8 Pages
The book “The Flash Boys” by Micheal Lewis has created large amount of publicity around the practice of High Frequency Trading (HFT). The concept of HFT is one of the most recent advancements in the Financial Markets but the effect that it will have are still unknown. Currently industry and academics are very divided if this practice is creating or destroying value for investors. In the past year since the book was released there has been increases in knowledge about HFT through academic research, Lawsuits, and the Media. The first thing that is needed is to understand how a HFT company like Virtu is able to make $732 Million last year and then looking at arguments both for and against HFT. Does High Frequency trading deserve to be seen in the negative Light portrayed my Michael Lewis or as the next advancement in our Financial Markets.
The technology and Programming that is used by High frequency Traders is very advanced. The first goal of this paper will be to provide an insight to how traders are able to have such high and consistent returns. The strategies used by High Frequency Traders are very complex but there are underlying principles that make it easy to understand the industry. There are 2 areas where the profits from High frequency Traders are derived from.
The first way is through price movements; since the stock market is constantly moving the difference in the Bid and Ask spread presents constant opportunities for mispricing of assets. The goal of HFT is to
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