Michael Lewis "Flashboys" update

I picked up this link from someone on the REIT board. Particularly annoys me since I have a couple of accounts at Schwab.

Here’s a link to a Vanity Fair article by Michael Lewis. He writes about the reaction to Flash Boys one year later. Interesting reading. Still depressing to us small investors. Here’s a snippet:

The UBS dark pool happens to be, famously, a place to which the stock-market orders of lots of small investors get routed. The stock-market orders placed through Charles Schwab, for instance. When I place an order to buy or sell shares through Schwab, that order is sold by Schwab to UBS. Inside the UBS dark pool, my order can be traded against, legally, at the “official” best price in the market. A high-frequency trader with access to the UBS dark pool will know when the official best price differs from the actual market price, as it often does. Put another way: the S.E.C.’s action revealed that the UBS dark pool had gone to unusual lengths to enable high-frequency traders to buy or sell stock from me at something other than the current market price. This clearly does not work to my advantage. Like every other small investor, I would prefer not to be handing some other trader a right to trade against me at a price worse than the current market price. But my misfortune explains why UBS is willing to pay Charles Schwab to allow UBS to trade against my order.


I plan to lodge my concerns this morning with Schwab. I’m sure to no avail.



All of my accounts are with Interactive Brokers. IB allows me to route all of my stock orders through IEX, which I do. As a small, individual investor I figure this is the best way for me to fight back: give my business to the people who are playing fair.


I often get better than the asking price when placing a market buy order at Schwab, and often get better than the bid price when I place a market sell order. But these are perhaps smaller orders that are going to interest the high speed traders.


I(n principle the dark pools and high frequency traders really get me po’d. In practice I think I am such a small fish in such a big ocean that it’s all bu irrelevant.

Still and all, I’m all for a transaction tax of a cent or two per share traded. Doesn’t even have to be fancy and carve out exemptions for trades under a certain threshold (which would only provide a work around for the Flash Boys). I’ll pay a a buck or few tax for each trade.

Ehat to do with the tax? I can think of a bunch of ways to dedicate it, probably bet to just make it part of the general fund or whatever you call it.

My comment at Amazon


Denny Schlesinger

Whoa - I apologize for all the typos in my last post. I must have been half asleep or something.