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