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Blink 3 of 8 - The 5 AM Club
by Robin Sharma
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Flash Boys summary
A Wall Street Revolt
7 mins
Brief summary
Flash Boys by Michael Lewis is a captivating non-fiction book that delves into the world of high-frequency trading and the rise of Wall Street's new breed of traders. It exposes the hidden dangers and unfair advantages in the stock market.
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Flash Boys
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A new problem, a new solution
The moment Brad Katsuyama hit “Enter,” he knew there was a problem. It was 2007, and Katsuyama was working in New York for the Royal Bank of Canada (known as RBC). The problem was, whenever he hit Enter to place an order – like buying 10,000 shares of Intel – the price would suddenly go haywire. Thinking he’d be able to turn around and sell for $22 a share, the moment he pressed that button, the share price would plummet, leaving him with massive losses. Suddenly, Katsuyama could no longer trust the market.
The problem was compounded by the fact that the stock market had become so complex that even veteran Wall Street brokers were largely clueless about the finer details. But by gathering a team of experts in various fields and merging their minds, Katsuyama was able to figure out exactly what was going on.
The problem was that Katsuyama’s orders were being “front-run.” The instant a big order – like 10,000 shares of Intel – appeared on the market, the algorithms being used by high-frequency trading firms (known as HFT firms) were able to get ahead of that order before it was broken up and distributed to the various stock exchanges. We’re talking about milliseconds here: the time it takes for an electronic order to make its way from Manhattan to New Jersey. But that was enough time to bombard the markets with competing orders, which would cause the price to change before the transaction was complete. This is what’s known as “front-running.”
Now, thanks to expert knowledge of the fiber optic networks in the tri-state area, Katsuyama and his team were able to develop a tool known as “Thor.” This program could stagger the release of an order so that it reached the various stock exchanges at exactly the same time, effectively ruining any opportunity for front-running.
But as it turned out, Thor was a tiny band-aid on a widespread problem that was being enabled by some of Wall Street’s biggest banks. A complex system of incentives was in place that allowed HFT firms to earn as much as $160 million a day by essentially screwing over investors. A loophole in electronic trading had been discovered and was being ruthlessly exploited, with little consideration for the long-term damage it was causing to both investor confidence and market stability.
It was going to take more than Thor to fix this problem.
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What is Flash Boys about?
Flash Boys (2014) is an investigation into the dark underbelly of the US financial markets. It also chronicles the birth of a new stock exchange, the IEX, created to counteract a rigged system that was facilitated by technological loopholes and a lack of transparency.
Flash Boys Review
Flash Boys (2014) by Michael Lewis uncovers the hidden world of high-frequency trading and exposes the flaws in the financial system. Here's why this book is worth reading:
- Offers a shocking and eye-opening look at the unethical practices of Wall Street, giving readers a deeper understanding of the financial world.
- Provides compelling evidence and real-life stories of individuals who fight against the corrupt system, making it a gripping and inspiring read.
- By revealing the complexity of high-frequency trading in a clear and accessible way, the book keeps readers engaged and leaves no room for boredom.
Who should read Flash Boys?
- Anyone who’s ever invested in the stock market
- People interested in stories of financial corruption
- Fans of underdogs who fight the system
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Flash Boys FAQs
What is the main message of Flash Boys?
Flash Boys exposes the corrupt practices of high-frequency trading and highlights the need for transparency in financial markets.
How long does it take to read Flash Boys?
The reading time for Flash Boys varies, but it's around several hours. The Blinkist summary can be read in just 15 minutes.
Is Flash Boys a good book? Is it worth reading?
Flash Boys is worth reading for its eye-opening revelations about the dark side of Wall Street. It's a must-read for anyone interested in finance.
Who is the author of Flash Boys?
Flash Boys is authored by Michael Lewis.
What to read after Flash Boys?
If you're wondering what to read next after Flash Boys, here are some recommendations we suggest:
- Moneyball by Michael Lewis
- Going Infinite by Michael Lewis
- The Undoing Project by Michael Lewis
- How Economics Explains the World by Andrew Leigh
- Mindset by Carol Dweck
- Switchers by Dawn Graham
- The 48 Laws of Power by Robert Greene
- The Diary of a CEO by Steven Bartlett
- Quiet by Susan Cain
- The Human Condition by Hannah Arendt