‘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.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.