A Wall St. fight over the allegation the stock market is ‘rigged’

Last evening on APM’s Marketplace, author Michael Lewis further explained his assertion that the stock market is rigged.

The face of the stock market — traders on the floor — is a mirage for the saps who watch TV and actually believe the traders are the ones who are controlling the selling, he said. They’re not, computers are. And they’ve gamed the system.

“Imagine a casino that wants to create a new poker game, and it wants to get people into the poker game. It goes to a handful of good poker players and it says, ‘Hey if you sit at this table you can deal the cards, and you alone will know that the decks have no fours, no nines and no queens in it. Then they go to tour bus companies and say ‘Bring in tourists to come play against these guys. We’re not going to tell those people that there are no queens or nines or fours in the decks.

“Of course, the guys who know the missing cards have this huge tactical advantage over the suckers who roll into the casino…. Basically, in this analogy the casinos are the stock exchanges, they provide this unfair edge to the high-frequency traders who are the card sharks and investors are the guys on the tour bus.”

Listen for yourself.

  1. Listen Author Michael Lewis (Marketplace)

    April 1, 2014

This revelation is not going over well at all with the people who make their livings on Wall Street.

On CNBC yesterday BATS Global Markets exchange president William O’Brien (BATS is where a lot of the rigging is said to be taking place) said “shame on both of you” to Lewis and Brad Katsuyama, the trader who first realized that a computer was consistently beating him to the punch on trades — by milliseconds — forcing him to buy a stock at a quick profit to the people who owned the computers.

The trading floor — or what they want us to believe is a trading floor — actually stopped to watch the fight, and it is worth every minute.

The only thing that would’ve made the fight better is if Mark Haines was still alive.

  • kevinfromminneapolis

    I’ve been reading about this thinking why is it even allowed? It seems an easy solution to say trades may only be executed in divisibles of 1, 5, 10, 30 seconds or whatever is deemed best.

    But it’s more proof that the daily up and down of the stock market is completely disconnected from reality and should no longer be reported on as if it matters.

    • I can’t tell whether I should care MORE or LESS about the daily ups and downs, though. First of all, I’m 60 now so there’s not much long-term left in my financial planning. That’s my retirement money sitting in these people’s hands.

      • What is this “retirement money” of which you speak?

        /Probably going to be found dead at my desk.

      • kevinfromminneapolis

        Well, ultimately the Yellowstone super volcano will likely make it irrelevant, but just in case we’re spared. I read a compelling article a while ago arguing that people approaching retirement need to maintain more in their long-term allocation because of longer life spans. Theory being that if you trend too much toward fixed income too early you’ll be missing out on growth you need to get you through longer.

    • Dave

      It’s allowed because no one ever disallowed it.

  • MrE85
    • Yep, they started that investigation about a year ago. It should be interesting to find out how these clowns are gaming the system, if they ever let that be known.

  • The linked “debate” is awesome, although the whole “cross talk” and “talking over each other” is irritating as heck.

    O’Brien was totally on the defense and came across as a giant, greasy weasel.

    • Agreed. If you’re shouting over somebody and won’t let them speak, your point loses credibility in my eyes.

  • Dave

    I’m gonna go way out on a limb and predict that nothing changes.

    • tboom

      Yep. In the Savings and Loan crisis of the late 1980’s S&L executives went to jail. In 2007 and 2008 when large financial institutions collapsed and almost took the world economy along, the US Government handed out executive bonus checks.

  • MikeB

    There is always money
    to be made when there is an imbalance in information, and execution. Transparency is one antidote and that
    is why we will see some ferocious pushback against the Lewis book. You see the
    CNBC anchors so willing to carry the water for those institutions on Wall St
    that you wonder if they themselves see what they are doing.

  • Jim G

    This brings up Social Security’s privatization, a major initiative the conservative right often touts as a solution to its funding problem. The privatization of Social Security would allow these high frequency traders to skim billions each year, as our 401-K funds currently are today. This again only enriches the high frequency trading leaches that have attached themselves to the stock markets with no benefits to individual customers.

    • kevinfromminneapolis

      I’ll take the crumbs my accounts have gained – like multiple years of double-digit growth – while these guys do their split second voodoo over the sham of Social Security any day, any time.

      • Chris

        I do hope local republicans keep talking about what a sham they think social security is in comparison to Wall Street.

        • kevinfromminneapolis

          Let’s invest in each and check our accounts in 30 years.

  • MrE85

    NewsCut has “Featured Comments” now?

    • For about a month. I know. You’ve been busy out changing the world.

  • kevinfromminneapolis

    Wouldn’t another simple solution to that trades are counted the moment they are sent, not the moment they are received? I’m clearly an expert here.