Flash Boys Chapter Summaries

Michael Lewis brings the dealings of the financial world to light in Flash Boys, a book that analyzes the operations of Wall Street and New York Stock Exchange (NYSE) trades. In the book, the author introduces readers to an unobserved aspect of the financial market’s underworld, where words like High Frequency Trading (HFT) raise eyebrows due to their implications for the companies that had held positions as market leaders in previous years. In contrast to past years, technological advancements meant that the individuals who invested heavily in information technology (IT) assets finished first and subsequently gained an advantage over traditional financial traders. While the book makes it apparent through a variety of examples, there is a recurrent theme of

However, the introduction of low latency communications allows some traders to receive trading updates faster than their competitors. Overall, it becomes apparent that the stock market relies on this network due to the advantages that computerization introduces to the activity. However, this also comes with its own shortcomings since traders with greater financial resources could invest more in their IT infrastructure to increase their advantages in the market as evidenced in the book. For instance, the use of a fiber optic network for analyzing trades provided an advantage for firms such as Goldman Sachs since it reduced latency to 13 milliseconds down from 17. Although this might seem like a small advantage, it allowed them to make their trades faster than competitors and as a result gave them a monopoly over profitable trades at the time. Due to this advantage, the companies that invested in the network would also have an asset to protect when the market responded with its solutions in the spirit of continuous adaptation in future