‘Flash Boys’ Author Says Einhorn Surprised By HFT Revelations

Apr 3 2014 | 10:33am ET

Greenlight Capital’s David Einhorn was shocked by what Michael Lewis learned about high-frequency trading, the author said yesterday.

Lewis, whose new book Flash Boys has caused a media firestorm on HFT, said that even the savvy hedge fund manager didn’t initially understand how high-frequency traders had, in Lewis’ words, “rigged” the U.S. stock markets. When he found out, he said, “Oh my God. This I did not know,” Lewis told Bloomberg Television yesterday.

Einhorn, an avid poker player, and other large investors are like “dumb tourists” lured into a casino where the card games are fixed, Lewis insisted.

“It’s very clear people are being front-run,” he said.

Lewis book has caused an uproar, with legislators and regulators increasing their scrutiny of HFT, high-frequency trading firm Virtu Financial postponing its initial public offering, and recriminations lobbed in both directions. This week, AQR Capital Management founder Clifford Asness took to The Wall Street Journal editorial page to proclaim that HFT actually helps large traders such as his firm by making markets and lowering prices.

Lewis has defended his conclusions, arguing that the reaction to Flash Boys is similar to the one seen 11 years ago to his book Moneyball, on the general manager of the Oakland Athletics. That book, which brought sabermetric baseball analysis to popular attention, was initially ridiculed for its treatment of the statistical analysis that has since become the norm in the sport.

“The disruption to the industry that caused feels a lot like this,” Lewis said.

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