Greed at the speed of light: Michael Lewis returns to Wall Street 25 years after 'Liar's Poker'

Twenty-five years ago, Michael Lewis exposed a Wall Street run by gambling addicts. These days he reckons it’s rigged

A few weeks ago, I was inside the offices of one of the most successful hedge funds in London. The premises were huge, with acres of space between each desk. The walls were bare white, the atmosphere was hushed.

Everyone was either hunched over their computer terminals or talking to each other in murmured tones. The only eye-catching pieces of movement were the flickering lights of the share prices on their screens. The top executives had their own offices. On the outside of one, was a door plate: “Senior Scientist”.

A friend of mine worked for another fund. When I told him I’d just seen inside a laboratory that doubled up as a manager of people’s cash, he laughed. The textbooks that guided him through his career, he said, weren’t stock-market manuals but tracts devoted to advanced chemistry and mathematical equations from his days as a star science undergraduate at Oxford.

We have a quaint image of share trading as comprising a group of young men with slicked-back hair, brightly coloured blazers and shiny shoes all shouting at each other in pits at stock exchanges around the world. But those days are long gone. Hardly any market engages in open-floor dealing any more. It’s old hat, went out with the ark.

Why? Because it was inefficient and too slow. No person could replicate the speed of a computer with a fibre-optic cable; more remote was the possibility that a human being could match a programme tailor-made to spot an opportunity and trade in microseconds.

It’s this world that Michael Lewis explores in his new book, Flash Boys: Cracking the Money Code. Presumably to drop the local flavour, they changed the title from the US version, Flash Boys: A Wall Street Revolt. Both are apt. The Brit name is more general, clearly something mysterious about computers and money; the US one hints at some sort of institutional disapproval and possibly a  fight-back.

For anyone familiar with Lewis’s work, his method here is a favourite one of stumbling across unlikely characters that could have stepped straight out of Central Casting and then prising from them tales that shine a light on a hitherto closed world. His writing is sharp, acutely observational and, at times, brilliantly funny. His skill, which he has been honing ever since his classic Liar’s Poker in 1989, is to make a complex, dry-as-dust subject colourful, ever so readable  and shocking.

Back then, Lewis wrote Liar’s Poker because he was appalled by what he experienced as a bond trader at Salomon Brothers. The group portrait he painted was one of ruthless, avaricious, testosterone-fuelled men who revelled in being called “Big Swinging Dicks”, who would literally speculate on anything, and cared little for humanity or anything else that might get in the way of their relentless progress. It was meant to be a warning cry about Wall Street and City excess. Instead, rather like the movie Wall Street, which came out in the same era, it served as a magnet for every wannabe Gordon “greed is good” Gekko out there.

Roll forward a quarter of a century and Lewis continues to expose mind-numbing, awful behaviour. His anger is just as marked as it ever was.

“If it wasn’t complicated, it wouldn’t be allowed to happen,” Lewis said on CBS’s 60 Minutes news programme on Sunday night. “The complexity disguises what is happening.” He added: “The stock market is rigged.”

That is the crucial difference between now and then – that the gambling element has vanished. For this we have to thank computers, and in particular HFT platforms. HFT stands for high-frequency trading. For those among us who like to hark back to traders who stand and point and holler, his message is simple: wise up.

“Financial markets have changed too rapidly for our mental picture of them to remain true to life,” he writes.

Forget gentlemanly handshakes and the tradition of “my word is my bond”. What Lewis introduces here is a harder, terrifying side; an industry peppered with phrases like dark pools – effectively private stock exchanges run by the biggest brokers – and algorithms, front-running, trading speed and liquidity.

To give some idea of what he is talking about, take this one episode: a character called Rich Gates manages a $2bn (£1.1bn) mutual fund belonging to 35,000 small investors. He grows suspicious of Wall Street brokers announcing they would like to protect him. Protect him from what?

That, plus the repeated references to dark pools and speed, cause him to devise a test. He does it over and over again, and each time the outcome is the same: he places a buy or sell order in a dark pool, a third party gets wind of what he is doing and quickly, in a split second, nips in and moves ahead of him. The result is that he has to pay slightly more for the stock he is buying and gets less for the shares he is selling.

Not much, but enough, given that his trade is one of many thousands posted daily, to make him realise that fortunes are being amassed. Late in the day, the authorities have woken up – “Insider Trading 2.0” is New York attorney-general Eric Schneiderman’s phrase for it. But not just the regulators. The Wall Street Revolt in the title of the US edition is not only a reference to them but to a band of crusaders behind IEX, a trading hub that aims to take on the unscrupulous giants and beat them at their own game.

Lewis’s hero is Sergey Aleynikov, who is accused of stealing Goldman Sachs’s proprietary code and is imprisoned before being acquitted (it was the authorities’ panicky response, including the involvement of the FBI, and the jitters of Goldman, to the copying of the computer code that first alerted Lewis to its significance).

This is a disturbing work, and yet again, despite Schneiderman’s awakening, the authorities emerge as too slow, unable to keep pace with the financial sophisticates.

I’ve looked him up: Lewis is 53, and presumably has another good 25 years of exposing and narrating left in him. It does not bear thinking about what he will be describing in 2039, some  50 years after he first alerted us in Liar’s Poker.

News
The cartoon produced by Bruce MacKinnon for the Halifax Chronicle-Herald on Thursday, showing the bronze soldiers of the war memorial in Ottawa welcoming Corporal Cirillo into their midst
news
Voices
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into disastrous conflicts
Voices
Nigel Farage has backed DJ Mike Read's new Ukip song
voicesNigel Farage: Where is the Left’s outrage over the sexual abuse of girls in the North of England?
Property
One bedroom terraced house for sale, Richmond Avenue, Islington, London N1. On with Winkworths for £275,000.
property
PROMOTED VIDEO
News
The Edge and his wife, Morleigh Steinberg, at the Academy Awards in 2014
peopleGuitarist faces protests over plan to build mansions in Malibu
News
i100
News
peopleFox presenter gives her less than favourable view of women in politics
News
Mario Balotelli has been accused of 'threateningly' telling a woman to stop photographing his Ferrari
peoplePolice investigate claim Balotelli acted 'threateningly' towards a woman photographing his Ferrari
Arts and Entertainment
Paul Anderson plays Arthur Shelby in Peaky Blinders series two
tvReview: Arthur Shelby Jr seems to be losing his mind as his younger brother lets him run riot in London
Voices
Don’t try this at home: DIY has now fallen out of favour
voicesNick Harding, who never did know his awl from his elbow, is glad to see the back of it
News
ebooksAn unforgettable anthology of contemporary reportage
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

SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

£350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

Chief Financial Officer

120-150k: Accountancy Action: We are looking for an experienced CFO from a min...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again