After the publication of the book Louis Michael "Flash Boys: A Wall Street Revolt" on March 31 financial sector of United States of America began to look as a beehive of the disturbed bees. In one week the subject high-speed trades drew more attention, than for the last years.
the Book Louis Michael, developments describing chronology high-speed trades (high-frequency trading, HFT) in stock market United States of America, was published on March 31. It at once became the best-seller, as well as many works of the journalist.
is presented In the book quite critical evaluation of how improvement of technologies and speed increase in trades United States of America changed stock market. According to Lyiyus which he stated in interview to various mass media, "use high-speed trades allows to manipulate stock market United States of America".
Company which possess opportunity for faster sending warrants for purchase or sale of shares have advantage before other participants of the market. The financial companies are ready to pay huge money to the programmers writing trade codes for high-speed trades. Thus any slower participant of the market – from the private investors to large hedge fund could become the victim.
of Investigation
At once after the publication which has caused a noticeable resonance, there were statements for checks in financial sector "regarding insider transactions" when using high-speed trades. It became clear that in FBI of United States of America nearly a year "investigate" this question. Thus in FBI "asked to help" traders with this investigation.On to data editions American daily business newspaper "The Wall Street Journal" (American daily business newspaper "The Wall Street Journal"), in Securities and Exchange Commission of the USA (Securities and Exchange Commission, SEC) also declared that conduct investigation on the possible facts "illegal use of technologies high-speed trades". The new chairman of the Commission on trade commodity futures (Commodity Futures Trading Commission, CFTC) Mark Vetyen, on information information agency "Reuters", reported that CFTC also conducts check on the matter.
Scandal on the air
the Exchanges also were involved in "high-speed manipulations": they provide slow data links, allowing traders who use HFT, to earn at the game against the slower competitors.TV channel of broadcasting company "CNBC" invited for participation in discussion of a subject high-speed trades the author of the book Louis Michael, the head of the electronic exchange BATS Louis Michael O'Brien, and also the co-founder of the IEX exchange Bradley Kattsuyama. He acts in a role "the protagonist in the third party" in the book Louis Michael, describing the acquaintance to a situation which arose in financial markets in 2007 from the beginning of active use high-speed trades.
having Hardly managed to begin, discussion very quickly turned into furious dispute. The head of BATS declared that it "has to be a shame" to critics that they wrote. He started pointing a finger at Louis Michael and Katsuyama, serially accusing them of attempts to blacken the BATS exchange and it personally.
O'Brien:
I cannot recover the last some days. First, Louis Michael and Brad, it has to be a shame to you that you in a false manner accuse literally thousands people and scare away million potential investors. It very much old tactics, they want to blacken this business, to present it based on mistrust, fear and charges. You really consider, what thanks to high-speed trades it is possible to manipulate the market?Katsuyama:
it is difficult to be at exact loss for words …O'Brien:
do not shirk! You and told in the book: "Then I understood that in the markets there are manipulations". Your words? It is disgusting that you try to leave now from the answer. Katsuyama: You should not speak so...O'Brien:
So you trust in it or not? Louis Michael quotes you in the book. Yes or no?Katsuyama:
it is good. Yes, I consider that in the markets there are manipulations and you take in them part.the head of BATS "undertook" Then the author of the book:
Louis Michael:
I already spoke and wrote about it, Mr. O'Brien and the BATS exchange actively participate in all this, he – part of a problem. His statements and behavior speak for themselves. You by the way, absolutely forgot – I at you on a visit was.O'Brien:
Is not present, you at us were not. It is lie.Louis Michael:
It is the truth, I looked as you work.O'Brien:
It is a lie.Louis Michael:
That "lie" means, I to you came.O'Brien:
When, designate date?Louis Michael:
On the Fifth of February.O'Brien:
What year?Louis Michael:
the 2013th …
thus the situation received continuation. Having listened to all charges, to Katsuyam took an interest at O'Brien, whether that that the BATS exchange and its divisions, EDGA and EGX, use slower system of data transmission according to warrants from participants of the market (system Securities Information Processor, SIP) that allows the traders using vysoskorostny algorithms can confirm, to play against slower competitors.
O'Brien rejected the similar assumption, having declared that data on warrants on securities are processed directly and "anybody has no advantages". However after interview the BATS exchange issued the official statement and by that called into question the statement of chapter of companies, having confirmed Katsuyama's assumption. On this American daily business newspaper "The Wall Street Journal", under pressure from the general prosecutor New York in BATS admitted the fact of use of system of slower processing of warrants.
Postponed IPO Virtu
the Strong resonance which the book called Louis Michael, the statements made by it concerning manipulations in the markets and special attention of regulators to high-speed trades – this negative background frightened off companies Virtu Financial which planned to carry out primary placement of the actions. Virtu is one of the largest companies which actively use high-frequency trading.during IPO in companies expected to attract to $3 billion. However, on to data editions of newspaper "The Financial Times" (FT), in Virtu considered that in the circumstances companies will not manage to raise desirable volume funds therefore "it is worth postponing" carrying out placement.
of the Victim and reaction
As was already noted, Louis Michael claims that when using high-frequency trading suffered not only privates investors, but also large funds and banks. It is a question as about financial, and reputation losses.B interview information agency "Bloomberg" Lyiyus noted that when high-speed trades faced active use such investors, as Eynkhorn David (the head of Greenlight Capital), they appeared "stupid tourists", without understanding a problem essence.
Should be noted also the official statement companies Charles Schwab, one of the largest brokers to United States of America. Chapter of companies Shvab Charles declared:
"Use high-speed trades allows traders to use weak spots in a financial system, brings them billion dollars, but thus at the same time undermines trust of investors to the markets. This problem is similar to growing cancer education, here for a long time it is time to take serious measures. In case of further loss of confidence the capital can start leaving from financial markets".