Confero Summer 2014: Issue 7 | Page 26

On Topic Be First, Be Smarter, or Cheat. By Gabriel Potter, AIF® “There are three ways to make a living in this business: be first, be smarter, or cheat. Well, I don’t cheat. And although I like to think we have some pretty smart people here in this room, it sure is a hell of lot easier to just be first.” ­— Margin Call 18 | SUMMER 2014 24 2013 C ompared to the latest celebrity scandal, we will freely admit that economics and fiduciary concerns can be a dry topic. So, we are always the first to celebrate when a book on economics or finance enters the cultural conversation. Furthermore, we are especially thrilled when a book of substantive ideas does more than entertain, but has the potential to affect the economic or regulatory environment. between the author, his primary source – IEX head Brad Katsuyama, and the beleaguered President of BATS Global Markets, William O’Brien. Of course, this fight was verbal - it didn’t escalate into a fistfight - but it definitely crossed over the line of civil discourse. Moreover, it stopped trading on the floor of the New York Stock Exchange as market makers and specialists watched stunned at the brawl. The latest book with the potential for both engaging entertainment and changing the environment is Michael Lewis’ new book, “Flash Boys”. As high-minded as we like to be, we are a little sad to admit that some of the reason for the book’s entertainment value stems from its confrontational nature. This may be the only book on stock trading which spurred a virtual yelling match on CNBC Let’s discuss the argument briefly: Michael Lewis’ new book, “Flash Boys” peers into the contentious world of high frequency trading. The heart of the debate is a simple question: What is high frequency trading? Is high frequency trading a legal version of arbitrage, in which traders find an identical asset in two separate markets trading at slightly different prices (usually just a penny) and