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Tuesday, April 8, 2014

High Frequency Trading

Here's an informative piece by Carl Richards from the New York Times on Michael Lewis's Flash Boys: A Wall Street Revolt:

"What Michael Lewis's Book Has to Do With Your Money."

I haven't read the book but am  in the process of getting it on my pile of things to read - I'm number 8 out of 24 at my local library.  I'm a big fan of Lewis.  He is one of those writers who make you smarter about complex developments and you enjoy it.

Carl Richards makes the important point, with his napkin diagram (showing some investors are making a mountain out of a molehill) as well as with his writing, that high-frequency trading will not affect most investors, especially for the investor in low-cost, well-diversified index funds.  Actually, I would be remiss if I didn't quote Michael Lewis (a man who knows a lot about investment markets) on how he approaches investing:
When asked to describe how he invests, Mr. Lewis told CNBC, “I’ve always been a boring and conservative investor. I own index funds, and I don’t time the market ... I put it away and I don’t look at it very much. It doesn’t follow from the story in the book that you should flee the market.”
For those interested, the subject of high-frequency trading has been covered before in a well-written, entertaining book by Scott Patterson that I reviewed in November of 2012:

Dark Pools - A Book Review

If you are far back in the library waiting line, you may want to check the stacks for Patterson's book.

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