The High-Tech Wall Street Rip-Off Setting the Media on Fire

By Marshall Auerback

April 2, 2014 | A brand-new book by Michael Lewis, author of Liar’s Poker and Moneyball, has set the media on fire. In Flash Boys: A Wall Street Revolt,Lewis argues that not only do the liars on Wall Street play poker, but the poker game itself is completely rigged against the little guy.

You, my friend, are the little guy. So am I. And so is everyone else who does not have access to a supercomputer.

Lewis contends that the U.S. stock market — you know, that famous system which impacts how much money is in your 401(k) — is rigged in favor of high-speed electronic trading firms, which use their advantages to rip off investors to the tunes of billions of dollars a year. These firms engage in a widespread practice known as high-frequency trading (HFT). Let's explore why this is very bad for you and me. (Be sure to check out Lewis' 60 Minutes interview [3], which also features young Brad Katsuyama, the Canadian trader who helped suss out the problem.)