Currency Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market

Really insightful

Livre faisant une description historique, un peu romancée du développement de la digitalisation des places boursières et de l'émergence de nouveaux marchés financiers. Intéressant de voir à quel point des idéologies démocratiques peuvent être détournées pour construire des intruments de rente et d'influence. Inquiétant de voir la complaisance de certaines autorités vis-à-vis de structures complètement opaques et anti-compétitives.

Muy buena, buena compra

Scott Patterson isn't Michael Lewis. Still, he manages to hold one's attention while providing a selective history and a basic lesson in the mechanics of stock trading circa 2012. The story is choppy -- Patterson had only a limited number of sources and he pieced together much from publicly available information. Still, he provides an enlightening lesson on the dramatic changes in the functioning of the equity markets over the past decade. Investors of course can't help but be aware that stock trading these days is different than in past decades. To place a stock trade one uses an electronic platform like TD Ameritrade instead of phoning a broker. What investors may not realize is that the fundamental structure of equity markets -- the market making system (market makers on the NYSE were called "specialists") has all but disappeared, having been replaced by high frequency traders (HFTs). These largely unregulated trading firms serve the function of market makers but they have no obligation to stick around when the going gets rough. Patterson explains how the system evolved. It had a haphazard evolution that nobody planned. Amazingly, it sort of works. Except when it doesn't (as in the flash crash or the Knight debacle). The system is still developing and over time it will get better. At the moment, it seems cobbled together and wobbly, a scary mess really. It is (surprise!) designed to benefit the people who built it and not investors. Most importantly, with no limits on speed (the SEC could have easily created a level playing field by imposing a latency of say 10 msec) those trading firms who have their computers closer to the exchange computers ("colocation" is best) have an advantage. This is about as unfair as one can imagine. At the end of the day, there isn't any evidence that the current system serves investors any better than old system. Yes, spreads on average are lower, but increased volatility and difficulty executing larger size trades has probably caused trading costs to increase overall. Nobody knows how much profit HFT firms are extracting from the public markets, but the fact that they are spending hundreds of millions on technology suggests that it is considerable. When creative destruction occurs, some things become better and others don't. Clearly, the regulators have been asleep at the wheel while the cataclysmic changes in the stock market have occurred. Huge regulatory mistakes have been made because regulators have failed to be proactive and have jumped in only when thing got truly out of hand -- too little, too late. Patterson explains the basic details in the context of engaging stories about some of the architects and players of HFT. Okay, finance can be boring so Patterson does his best to spice things up it up with lots of action, that gets tedious after the umpty-umpth time ("hundreds of thousands of orders flying into the market each second through high-speed connections, fighting to be in front of all the others. Just as quickly, as stocks bobbed and weaved, . . ." and ". . . trades fizzing through fiber-optic cables laced around the world" it is time to to want to scream "enough!"). Still, I couldn't put the book down.

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In "Dark Pools" geht es nur am Rande um Dark Pools im engeren Sinn. Patterson benutzt den Begriff statt dessen als Sinnbild für die elektronischen Börsen als ganzes, die aufgrund der Komplexität und schieren Masse von Daten - inklusive versteckten und gecancelten Orders und dem ständigen Kampf immer neuer Algorithmen untereinander - nicht mehr durchschaubar oder kontrollierbar seien. Ähnlich wie schon in "The Quants" trägt Patterson im Stile des Boulevardjournalismus erstmal dick auf: Aus Lautsprechern tönt HipHop oder Metal während "ultra-competitive", "testosterone-fueled", "elite of the elite", superreiche junge Computergenies mit "dazzlingly complex algorithms" und "high-octane trading robots" die Märkte auf Kosten von "mom and pop investors" manipulieren. Der Kern des Buches besteht jedoch vor allem aus der faszinierenden und spannend erzählten Geschichte der Computerisierung des US-Börsenhandels, angefangen mit den SOES-Bandits nach 1987, wobei die Entstehung des Island ECNs in den 1990ern, und dessen idealistischer Schöpfer, der öffentlichkeitsscheue Programmierer Josh Levine, im Mittelpunkt stehen. Das wurde (so) noch nie erzählt, und dafür verdient das Buch, trotz einiger schwächen 5 Sterne. Am Ende werden dann noch bekanntere Themen, wie etwa der Flash-Crash vom 6. Mai 2010 oder langfristiger orientierte automatisierte Handelssysteme besprochen.