broken markets call to action-end

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1、13CalltoActionGetready,Mark.Thatincrediblecompanyyou’vebeennurturingsinceHarvardisabouttobecomeoneofthebiggestcasinochipsonWallStreet.Aftertradingin“privatemarkets”amongonlysophisticatedinves-tors,MarkZuckerberg’sFacebookplanstogopublicinoneofthelargestandhigh

2、estprofileeventsonWallStreetdecades.WerecentlypennedanopenlettertotheyoungCEOonourfirm’sblogaboutwhoislikelytodominatethetradingofhisfirm’sstock:Youmaybethinkingthatregardlesswhichexchangeyoupick,yourstockwillhelpinvestorscreatewealthbyinvestinginyourcompanyfo

3、rthelongterm.Everhearofrebatearbitrage?La-tencyarbitrage?Colocation?Privatedatafeeds?ActionableIOIsordarkpools?Probablynot,butthat’swhatstocktradingisallaboutnowadays.Yourstockwillnowbetradedbyhighfrequencytraderswhohaveanaverageholdingperiodof22seconds.1Thema

4、jorityofthemwon’tcareaboutyourearningsoryournew“likeylike”button.Theywon’tcareabouthowmanygazillionusersyousigneduporhowmanyeyeballsareonyoursite.Theywillcareonlyaboutflippingyourstockforaverysmallprofit—millionsoftimesperday.Theywillcareonlyaboutgettingpaidar

5、ebateofroughly1/3pennypershareto“addliquidity”inyourstock.TheyarenotlookingtoinvestinFacebook;theyarelookingat217218BrokenMarketsitasatooltohelpthemmakemoneyintheirhigh-speedarbi-trageworld.Alsokeepinmindthatone-thirdofyourstockwillbetradedindarkpoolsthatareof

6、f-exchangeandawayfromthepublic’seye.Knowthateventhoughthespreadinyourstockwillbeafewpennies(mostofthetime),yourstockwillnotnecessarilybeliquid.Sure,yourstockwilltradealotofvolume,butthisisnotthesameasliquidity.Knowthatwhenyourstockstartstomovearoundintradayby3

7、–5%,therewillbenoonetocalltoaskwhatisgoingon.Intheirquesttomodernizethestockmarket,ourregulatorsendedupcreatingamonsterthatwedoubttheyevercouldhaveimagined,althoughwedothinksomeoftheresultswereintentional.Theyturnedwhatwasoncearelativelysimpleprocessofmatching

8、buyersandsellersintoaconflicted,fragmented,algorithmicnight-marewherenaturalsupplyanddemandnolongerisresponsibleforsettingprices.Inthisbook,wehaveillustratedthedamagingeffectsofthe