Brad Katsuyama: 'I believe that the markets are rigged'

An exposé of high-frequency trading in Wall Street has given the whistleblower a platform. And he's pushing for reform

Despite being under constant attack since he was thrust into the global spotlight less than a month ago, Brad Katsuyama remains defiant.

"We still to this day haven't seen a practical counter-argument other than just people throwing mud back and forth," says the 35-year-old, who has divided the financial world with his battle against the murky side of high-frequency trading.

Before the publication of Flash Boys, the latest exposé of Wall Street by the best-selling author Michael Lewis, Mr Katsuyama was little known on Wall Street and certainly not known outside of it.

Mr Lewis – whose earlier works include Liar's Poker and The Big Short – changed that by choosing the mild-mannered Canadian as the unlikely hero of his new book.

Flash Boys centres on a discovery by Mr Katsuyama, who at the time was working in New York for Royal Bank of Canada, of what he believed was a way traders were rigging stock markets and ripping off the general public.

The use of computer algorithms by firms to make trading decisions in thousandths of a second – so-called high-frequency trading – has been around for years. But Mr Katsuyama discovered that some computer trading programs were not just reacting to shares being bought; they seemed to be pre-empting the orders. He would go to buy a share, and in the time between clicking the button and the order being completed – a fraction of a second – the price had risen.

His journey to find out what was happening led him to discover that traders were exploiting the fact that different stock exchanges received orders at slightly different times – a matter of milliseconds, but still enough for the super-fast computers to jump in ahead of the trades.

Convinced this was creating an unfair market, Mr Katsuyama decided to shine a light on it by telling Wall Street what was going on – much of which he found was oblivious.

The decision to stick his neck out rather than keep quiet, he says, wasn't a hard one: "I had spent my career trading on behalf of clients and it just seemed natural to take this information to them."

When he was approached by Mr Lewis about helping with his latest book, Mr Katsuyama knew this would raise the profile of his fight. "I talked to my wife and said to her, 'Are you OK if this doesn't work, if I never work on Wall Street again?' And she was OK with it, and so was I."

Still, Mr Katsuyama – who has launched his own market centre, IEX, designed to stop the negative aspects of high-frequency trading – says it has been "kind of shocking to see how many people within this industry are fighting back".

In one memorable moment, Mr Katsuyama was accused on live television by William O'Brien, the president of the exchange operator BATS Global Markets, of scare-mongering in order to create publicity for IEX. He took a while to find his words, but eventually fought back: "I believe the markets are rigged, and I also think that you're a part of the rigging. So if you want to do this, let's do this."

The critics, Mr Katsuyama claims, "come into this with a bias and they don't want the market to change. They don't want the market to be more transparent – a lack of transparency is how a lot of these people make their living."

There has also been a lot of support. Mr Katsuyama has received thousands of emails and phone calls and says the book has not only "struck a chord with Main Street" but also with many on Wall Street who see "that changing the way the market operates is better for everyone".

The problem, he says, is that a society used to having free access to information through the internet is at odds with financial markets "which have always been about private information, knowing more than the person that you're trading against".

But he feels it doesn't have to be this way: "I think part of why Michael wrote this book, as sceptical as he was, is that there are actually people on Wall Street that are trying to restore trust and hope and faith that people can actually make money and run businesses and serve a greater purpose and serve society."

The City of London has been just as gripped by the debate over high-frequency trading, and asked whether there are the same issues here as across the Atlantic, Mr Katsuyama is careful to clarify that his knowledge of the UK markets is limited, but points out that Wall Street and the Square Mile have many similarities.

Certainly the furore around Flash Boys doesn't show any sign of dying away. On the day of its publication, the FBI announced it was investigating high-frequency trading and a number of other bodies have followed suit.

Flash Boys also looks likely to be turned into a film, which wouldn't be a new experience for Mr Lewis, whose books The Blind Side and Moneyball have been turned into Hollywood films starring Sandra Bullock and Brad Pitt, respectively.

As for who would play Mr Katsuyama, "we'll leave that to Hollywood if that ever becomes a possibility," he says.

If it happens, it would be yet another surreal turn for Mr Katsuyama and his fight. "The whole process, everything that's happened, has been pretty unbelievable," he says. "I just feel thankful to be in this position."

'Flash Boys' by Michael Lewis is out now (Penguin, £20)

News
scienceExcitement from alien hunters at 'evidence' of extraterrestrial life
Life and Style
Customers can get their caffeine fix on the move
food + drink
News
newsRyan Crighton goes in search of the capo dei capi
Extras
indybest

PROMOTED VIDEO
Arts and Entertainment
Actors front row from left, Jared Leto, Jennifer Lawrence, Meryl Streep, Ellen DeGeneres, Bradley Cooper, Peter Nyongío Jr., and, second row, from left, Channing Tatum, Julia Roberts, Kevin Spacey, Brad Pitt, Lupita Nyongío and Angelina Jolie as they pose for a
film
Sport
sport
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
A meteor streaks across the sky during the Perseid Meteor Shower at a wind farm near Bogdanci, south of Skopje, Macedonia, in the early hours of 13 August
voicesHagel and Dempsey were pure Hollywood. They only needed Tom Cruise, says Robert Fisk
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Horst P Horst mid-fashion shoot in New York, 1949
fashionFar-reaching retrospective to celebrate Horst P Horst's six decades of creativity
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Life and Style
news

As Voltaire once said, “Ice cream is exquisite. What a pity it isn’t illegal”

Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Market Administrator (1st line Support, Bloomberg, Broker)

Negotiable: Harrington Starr: Market Administrator (1st line Support, Trade Fl...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Data Support Analyst (Linux, Solaris, Windows Server, Reuters)

Negotiable: Harrington Starr: Data Support Analyst (Linux, Solaris, Windows Se...

Helpdesk Support Engineer (Windows, MS Office, Exchange)

Negotiable: Harrington Starr: Helpdesk Support Engineer (Windows, MS Office, E...

Day In a Page

All this talk of an ‘apocalyptic’ threat is simply childish

Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
Mafia Dons: is the Camorra in control of the Granite City?

Mafia Dons: is the Camorra in control of the Granite City?

So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Once the poor relation, the awards show now has the top stars and boasts the best drama
What happens to African migrants once they land in Italy during the summer?

What happens to migrants once they land in Italy?

Memphis Barker follows their trail through southern Europe
French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

Frank Mugisha: 'Coming out was a gradual process '

Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

Radio 1’s new top ten

The ‘vloggers’ signed up to find twentysomething audience
David Abraham: Big ideas for the small screen

David Abraham: Big ideas for the small screen

A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

Florence Knight's perfect picnic

Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

Horst P Horst comes to the V&A

The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

Mark Hix's summery soups

Soup isn’t just about comforting broths and steaming hot bowls...
Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

Tim Sherwood column

I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
Eden Hazard: Young, gifted... not yet perfect

Eden Hazard: Young, gifted... not yet perfect

Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
Tim Howard: I’m an old dog. I don’t get too excited

Tim Howard: I’m an old dog. I don’t get too excited

The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

Tom Peck on Match of the Day at 50

The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition