If time is money, finance now is capital gains to the nanosecond near.
If time is money, finance now is capital gains to the nanosecond near. 25 years after’Liar Poker’, the former trader who became star journalist star wrote ‘Flash Boys’, which tells how the stock market bomb ticks.
I believe that the idea of this book came to me when I heard about the story of Serge Aleynikov, this Russian computer programmer who worked for Goldman Sachs and who, in the summer 2009 and while he had resigned from the Bank, had been arrested by the FBI and accused by the U.S. Government of stealing computer code from Goldman. I had found strange, that as a result of the financial crisis, in which Goldman had played such an important role, as the only employee of the Bank who is indicted in fine or that he had taken something. I had found even more surprising that the U.S. Justice Department argued that the Russian programmer could not be released on bail on the grounds that, put into the wrong hands, the source code for Goldman Sachs could be used “to manipulate markets misused”.
Because, with Goldman, the code was in “good hands”?
(Because, with Goldman, the code was in “good hands”? And if Goldman Sachs wasable to manipulate markets, could other banks do the same?) But the most extraordinary maybe in this case was how it seemed difficult – for the few people who had tried – to explain what the Russian programmer had done. And there, I do not mean only what he had done wrong, but what he had done. What was his job. It was commonly referred to as a “high-frequency trading programmer”, but it said nothing. It was a technical term which most of the people in this summer 2009, including thosewho worked on Wall Street, had never heard. What was that trading in high frequency (THF)? What code that allowed Goldman Sachs to the “high-frequency trading” was important so that, when it realized that it had been copied by an employee, Goldman Sachs was forced to call the FBI? If this code was suddenly extremely valuable and so dangerous for the financial markets, how a Russian programmer who had worked for only two years at Goldman Sachs he had managed to get hold of it?
I ended up putting me looking for someone to be answering these questions. My research led me to a meeting room overlooking the site of the World Trade Center, ina building located at 1 Liberty Plaza. In this piece was assembled a small army of surprisingly knowledgeable people, coming from the four corners of Wall Street: renowned banks, major stock markets and high-frequency trading firms. A good numberof them had left well paid jobs to declare war on Wall Street, which meant, inter alia,to address the problem that the Russian programmer, recruited for this task by Goldman Sachs, had managed to create. And not only these experts could answer my questions, but also to a number of others to which I had not yet thought. However, these proved much more interesting than I had anticipated it.
Initially, my interest in the stock market was rather limited, although like everythingeveryone loved the watch if packaging, explode in flight, see the courts collapse. It is only when she collapsed on October 19, 1987, I gravitais around the 40th floor of the building of 1 New York Plaza, where the Trading Department was installed & Sales from my employer at the time, Salomon Brothers. That, for once, it was interesting. If it still needed proof that even Wall Street Insiders have no idea of what Wall Street can book us, was the there. A moment, all was fine; the next moment, all of theU.S. stock market had plunged 22.61% and nobody knew why. During the crash, some brokers of Wall Street simply refused to pick up their phone to avoid having to execute the orders that their customers wanted to spend to sell their titles. It wasn’t the first time that Wall Street is discredited, but this time the authorities reacted by amending legislation so that computers can more easily perform the work done by these beings humans, who were so fallible. The 1987 crash initiated a process – initially of low magnitude, then it strengthened over the years – which resulted in the replacement pure and simple men by computers.
Over the last decade, the financial markets have evolved too quickly to keep accurate mental representation we have of them. I’m willing to bet that the image most people have of these markets is still that décor that a photographer could capture. Onthis shot, a roll of ticker will scroll at the bottom of a kind of TV screen and male characters dressed in jackets with a color code stand standing in trading rooms shouting to each other. This image is obsolete. This world no longer exists. Since 2007, these types vest meets a color-coded standing in rooms of markets and sharp no longerexist. Human beings humans are still working on the floor of the New York Stock Exchange and various Chicago trading platforms, but they do require more no stock market and no longer have a vision of the Interior of these markets. Now, the American Stock Exchange is negotiating inside black boxes, in ultra buildings safe in NewJersey and Chicago.
Difficult to describe what is happening in these boxes – the roll of ticker that scrolled at the bottom of television screens captures only a tiny fraction of what is happening on the markets. The reports made public of what is happening in these black boxes are fuzzy and unreliable – the experts themselves are unable to say exactly whichtransactions take place inside those boxes, or when, or why. Obviously, the small carrier has no hope of knowing, not would be only partially. It connects on behalf TD Ameritrade, E * Trade or Schwab, he types the symbol of an action and clicks on a “Buy” button. What happens then? He imagines perhaps know what happens once it has pressed the key on his keyboard, but, believe me, in has no idea. Because if he knew, he would consider twice before pressing this button.
The world clings to this outdated image stock exchanges because it is reassuring, because it is so difficult to represent that has replaced it and because few people whoare to represent it even of you have no interest to do so. This book will attempt to deliver the panorama of the new stock market. A panorama formed by the realities ofthe Wall Street of the post-crisis and its new forms of financial intelligence, its computers programmed to carry impersonally “behaviors” that the programmer himself had never or all these people who landed on Wall Street with a very precise idea of what is to run the system and who realize that the system works much differently from what they thought. One of them stands at the center of this table, organizing themultitude of faces of the market into a coherent whole. His determination to shed light on the American financial world, and show people that this world has become, continues to bluff me.
Just like the life of programmer’s trading high frequency of Goldman Sachs who wasarrested for stealing computer code from this bank. When he worked there, Serge Aleynikov had an office on the forty-second floor of 1 New York Plaza, where stood the trading room of the ex-Bank Salomon Brothers, two floors above the place where I had watched the financial markets collapse. Like me, Serge Aleynikov was not feltto stay in this building and in summer 2009, he went to try his luck elsewhere. July3, 2009, he was sitting quietly in a plane between Chicago and Newark, New Jersey,perfectly oblivious to the impact of its actions in the world. He had no way of knowing what would happen when he landed. But again, he did not know how many issues of the financial game he had helped Goldman to play had become crucial. Curiously, to grasp the magnitude of these issues, it could have been to throw a glance out the window of his plane to realize the extent of the American continent below.
In the summer 2009, the line progressed with great strides and, day after day, two thousand men dug and drilled the strange shelter she needed to survive. Two hundred and five teams of eight men each, plus a multitude of consultants and experts, stood up now every morning at dawn to try to determine how to drill a hole in suchmountain, drill a tunnel under the bed of such River or even dig a trench along suchdevoid of aisle country road, without that person ever meets the obvious question :what for? Simple tube plastic barely four centimeters in diameter to House four hundred fiberglass of the thickness of a hair, this line yet already gave the impression of being a living animal, a reptile that evolved under the ground, with his needs and his own desires. The terrier had to be the straightest possible; It was perhaps the tunnel right that it ever had to dig.
It was to connect a data center located south of Chicago in a stock market located in Northern New Jersey. But above all he was, apparently, remain secret. Workers were aware only of the bare minimum. They dug in small groups separated from eachother and had only limited knowledge of the origin of the line and its destination. To be sure that they do not disclose, the purpose of the project they had deliberatelybeen hidden. “People did not stop to ask ourselves: ‘ it’s top secret?” It is for the Government?’ says a worker. “And me, I was merely answering: ‘Yeah.'” The men did not know what was to serve the line, but they were aware she had critics and they had to remain vigilant against potential threats. If they located someone who was digging near the site or if they found that a person would ask too many questions, they should immediately notify headquarters. Otherwise, they had instruction to say as little as possible. When asked what they were doing, they had to answer: “nothing special, it installs fiber.” In general, the conversation stopped there. But even if she continued, it was not so serious. Because drilling teams were also puzzled that the curious to the corner. They were accustomed to digging tunnels linking the towns between them and people between them. However this line not connected person with anyone. Its only purpose, that workers in saw, was to be as straight as possible, even if it meant that they had to drill through the mountain, instead of the bypass. Why?
Throughout the work, most of the workers laid not the question. The country lived under the threat of another crisis and they were simply happy to have the job. As summarized by Dan Spivey: “Since no one knew why it was digging, people began to invent their own explanations.”