How bots and algorithms now control the stock market
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3 years ago
Would you recommend Dark Pools to a friend?
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· Swift dev @ eon.codes
Awesome book. I read it a couple of years ago. I doubt its relevant today though, as tech moves so fast.
3 years ago
· Founder, OMB LLC
Looks like this will answer some questions that I had after reading Flash Boys
3 years ago
Once in a while a book comes around which scares you. This is one of those books. Dark Pools brings to light the underbelly of the NYSE and the NASDAQ. To me the stock market seems simple enough. You see a price of a stock on a screen and through brokerage sites you can choose to buy the stock for that price. You hit buy and your order gets sent somewhere and you are told you are now the proud owner of those stocks. But what exactly happens when you hit the buy button on your computer? Not enough of us have asked that question. And that’s fair because not even professional brokers seem to know what happens. What does happen is frightening. And Dark Pool makes sense of the behind the scenes intricacies of stock trading into a great, easy to follow, enlightening story. The book follows a few key characters from the later 1980’s into the early 2000’s where we see the transformation of the two largest stock exchanges in the USA. Once antiquated operation, the NYSE and the NASDAQ were human powered where people held onto stocks on average for 7 or more years. Now, the average share is traded every 20 seconds and computers now trade in nanoseconds. A nanosecond is one billionth of a second. Even in the early 1990’s, despite computing powers rising in the previous two decades brokers would stand on the floors of these exchanges as operators manually took orders and entered them into the markets. This situation was ripe with inefficiencies and left brokers with out of date prices where delays in information caused the quoted stock price to be different from the actual price of the stock. The prices themselves would move in fractions of eighths. This misinformation in the market meant that the Wall St elite could capitalize on these inefficiencies and arbitrage away profits which wouldn’t have existed otherwise. One man tried to change this. But in trying to democratize the stock exchange by boosting trade efficiency through computer trading a new power trader was born. Gone were the aristocratic elite, in come the rise of algorithmic computer programmers. Dark Pools is their story. A story of the brightest computer scientists being paid millions of dollars to find one nanosecond of an advantage for the namestreet financial firms which employ them. A story of insiders and ignorance; no one knows exactly what is going on but they know that something is going on except for a mere few. This is their story. If you like this book you might also like Flash Boys and Confessions of an Economic Hit Man.
2 years ago