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- Herausgeber: Business Book Summaries
- Kategorie: Religion und Spiritualität
- Sprache: Englisch
The must-read summary of Michael Lewis' book: "Flash Boys: A Wall Street Revolt".
This complete summary of the ideas from Michael Lewis' book: "Flash Boys" explains the increase of high-frequency trading (HFT) in the US market and Dan Spivey's project to connect a data centre in Chicago to a stock exchange in northern New Jersey by fibre optic cable. This summary points out the key ideas behind Lewis' book, such as the fact that speed has replaced the stability of the markets as the high-frequency traders' main objective.
Added-value of this summary:
• Save time
• Understand the main indeas behind Lewis' book
• Get an overview of high-frequency trading
To learn more, read "Flash Boys" and discover more about high-frequency trading!
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Seitenzahl: 47
Veröffentlichungsjahr: 2015
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Book PresentationFlash Boys by Michael Lewis
Summary of Flash Boys (Michael Lewis)
Book PresentationFlash Boys by Michael Lewis
Book Abstract
In the summer of 2009, Dan Spivey started a secret construction project to connect a data center in Chicago to a stock exchange in northern New Jersey by fiber optic cable. Spivey, an ex-options trader and market maker, didn't just want this fiber optic connection to go the standard cross-country route which by-and-large followed the railway tracks. Spivey's cable had to be laid in the most direct route possible, even if that meant boring a hole through the Allegheny Mountains.
About the Author
MICHAEL LEWIS is a columnist for Bloomberg News and a contributing editor to Vanity Fair. He is the author of several books including The Big Short, Boomerang, The Blind Side, Moneyball and Liar's Poker. His articles have been published in The New Yorker, The New York Times Magazine and The New Republic. Mr. Lewis has also narrated feature articles for Nightline and This American Life. He is a graduate of Princeton and the London School of Economics.
Important Note About This Ebook
This is a summary and not a critique or a review of the book. It does not offer judgment or opinion on the content of the book. This summary may not be organized chapter-wise but is an overview of the main ideas, viewpoints and arguments from the book as a whole. This means that the organization of this summary is not a representation of the book.
Summary of Flash Boys (Michael Lewis)
1. Spread Networks
In the summer of 2009, Dan Spivey started a secret construction project to connect a data center in Chicago to a stock exchange in northern New Jersey by fiber optic cable. Spivey, an ex-options trader and market maker, didn't just want this fiber optic connection to go the standard cross-country route which by-and-large followed the railway tracks. Spivey's cable had to be laid in the most direct route possible, even if that meant boring a hole through the Allegheny Mountains.
Dan Spivey had persuaded Jim Barksdale, the former CEO of Netscape Communications, to fund this secret construction project to the tune of $300 million. They named the company Spread Networks and they kept its construction secret until March 2010 – about three months before it was due to be completed – when they started offering access to this line to Wall Street traders. Their selling price: $14 million for a five-year lease. The capacity of the line was 200 users so once fully sold, Spread Networks stood to generate $2.8 billion in revenue.
What Spread Networks offered was a fiber optic cable which would allow a signal to achieve a Chicago to New Jersey round-trip travel time of 13 milliseconds. That was significantly faster than it currently took for a signal to be sent through the fiber cables offered by all of the existing telecom carriers like Verizon, AT&T, Level 3 and so on. Their round-trip time was slower and inconsistent. Sometimes it took 16 milliseconds or even longer for the round trip. Using the Spread Networks cable, a trader would get the jump on everyone else who wasn't using it – and that was precisely the pitch Spivey used to sell access to Spread Networks.
So why were Wall Street traders and the banks scrambling to pay $14 million to lease a high-speed fiber optic cable which merely shave a few milliseconds off the time others offered at no premium whatsoever? It all came down to the very simple concept of arbitrage – being able to buy something in one market at one price and then turn around and immediately sell it in another market for a higher price.
“Like every other trader on the Chicago exchanges, Spivey saw how much money could be made trading futures contracts in Chicago against the present prices of the individual stocks trading in New York and New Jersey. Every day there were thousands of moments when the prices were out of whack—when, for instance you could sell the futures contract for more than the price of the stocks that comprised it. To capture the profits, you had to be fast to both markets at once. What was meant by “fast” was changing rapidly. In the old days—before, say, 2007—the speed with which a trader could execute had human limits. Human beings worked on the floors of the exchanges, and if you wanted to buy or sell anything you had to pass through them. The exchanges, by 2007, were simply stacks of computers in data centers. The speed with which trades occurred on them was no longer constrained by people. The only constraint was how fast an electronic signal could travel between Chicago and New York—or, more precisely, between the data center in Chicago that housed the Chicago Mercantile Exchange and a data center beside the NASDAQ’s stock exchange in Carteret, New Jersey.”
- Michael Lewis
The scramble for access to this new high-speed fiber optic line made clear the financial markets were changing rapidly themselves. A new class of traders were coming to prominence and it was clear a lot of players were using new strategies to make money. Those strategies may vary in some details but the common factor was almost all of them depended on reacting faster than the rest of the stock market. Spread Networks was a genuine game changer and to keep using these new strategies, the traders had no choice but to pay the $14 million Spread Networks was asking.
