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Lewis-Katsuyama-O’Brien Rumble Just the Beginning: Opening Line

Direct Edge Holdings LLC Chief Executive Officer William O’Brien often points to the past imperfections of the market to bolster his case that criticism of its current state is overblown. Source: Direct Edge Holdings LLC via Bloomberg
Direct Edge Holdings LLC Chief Executive Officer William O’Brien often points to the past imperfections of the market to bolster his case that criticism of its current state is overblown. Source: Direct Edge Holdings LLC via Bloomberg

April 2 (Bloomberg) -- Tie down a hungry dog and start jabbing it with a stick and you get a sense of what went down on CNBC yesterday afternoon when Bats Exchange President Bill O’Brien faced off with Brad Katsuyama and Michael Lewis over high-frequency trading. O’Brien, apparently operating on the notion that the best defense is a good offense, verbally lunged at Katsuyama at the first moment, accusing the chief executive officer of IEX Group of “trying to build a business on the planks of fear, mistrust and accusation,” telling both of them they should be ashamed, as if they were in a conspiracy of some kind -- and then it got uglier. He hectored, he badgered, he sulked, interrupted and ridiculed. There were insinuations that Lewis had money in IEX, which Lewis denied. (For the record, Lewis is an occasional columnist for Bloomberg, although no one’s really sure what he looks like.) If electronic exchanges aren’t doing all they should to ensure market-making is fair for everyone, as asserted by Lewis and Katsuyama -- whose IEX was designed to blunt the price advantages inherent in HFT -- O’Brien’s vitriol overshadowed his message, which, to us, was that electronic trading isn’t bad per se, that stock markets can still be trusted, and that more fairness within them is possible. Maybe this has something to do with why Goldman is finally leaving the floor of the NYSE.

For a moment they sounded like two guys at a Flyers game. “If you want to do this, let’s do this,” said Katsuyama, sometimes eliciting cheers from traders on an NYSE floor that came to a halt as O’Brien went full-metal jacket. So, what just happened? This won’t be the end of it, of course. Virtu Financial’s IPO is an early victim of the collateral damage in the HFT fight, Lewis will be on Bloomberg Television today, and his book tour is just getting under way. Will the outside world, the retail investors, latch onto this moment in the future of market structure, “an accidental conspiracy” and “a problem that is at the heart of capitalism,” as Lewis said on CNBC? Because this fight is headed for Washington where, it is to be hoped, the lawmakers are more aware of the issue than was Ron Wyden, the Oregon Democrat and chairman of the Senate Finance Committee, during his appearance on CNBC moments after the guests had finished shredding one another. When all is said and done (probably years from now, if Dodd-Frank is anything to go by), whoever tells the best story wins.


But wait, there’s more. Having wrung what it can for now from the stock markets, high-frequency trading is growing in currencies. John Detrixhe, Nikolaj Gammeltoft and Sam Mamudi report today that high-frequency trading rose to 35 percent of FX volume as of October 2013 from 9 percent five years earlier. The HFT desks have moved on from overgrazed equities markets, where the portion of high-frequency trades has dropped to 50 percent from 66 percent four years ago. Unlike its reputation in equities markets, where HFT is being blamed for technology that allows its traders to (legally) front-run orders, thus affecting price and availability of inventory, it’s welcomed in currencies markets, Managing Editor Chris Nagi says. “Right now the currency market resembles the stock market in the 1990s, inasmuch as there’s a bunch of scandals going on based on its opacity,” Nagi tells us. Foreign-exchange desks are “so sick of backroom traders being led away in handcuffs that they’re pushing for transparency, and when you do that you get computers.”


U.S. stock-index futures were higher at 5:55 a.m. in New York ahead of the ADP employment report at 8:15 a.m. and factory orders at 10 a.m. Stocks rose in Asia overnight and were higher in Europe. The dollar strengthened to a two-month high against the yen and the 10-year Treasury note was lower.


We wonder what Billy Salomon, who turns 100 today, would make of all this. Actually, we don’t have to wonder. He told us. Deals in his day weren’t done over a fiber-optic cable leading to computer-server farms co-located just outside an exchange’s doors. In fact, back then exchanges had doors, and transactions were made with a handshake or a (rotary) telephone call. “Today you have lightning-fast trading, which no one understands,” Salomon told Dakin Campbell. “It’s a vast difference. It was more of a gentlemanly game.” Salomon, whose firm once employed our boss (and Michael Lewis), says the decline of the partnership structure in investment firms changed the culture, which once prized a customer’s trust. (See above.)


Former McDonald’s store managers, switching sides in the fight to raise pay for fast-food workers, told the advocacy group Fast Food Forward they withheld workers' wages by making them work after they had clocked out for the day or by altering time sheets, continuing the assault on the French-fry class.

Barry Diller stopped by the mothership to make a case for his Aereo television, which takes over-the-air TV signals and redistributes them through the Internet without paying fees for the programming. Its legality is being decided by the U.S. Supreme Court, where Diller finds a parallel to its 1984 decision backing Sony’s Betamax videocassette recorders.

Television viewers are also the goal of, which is set to introduce today a set-top box of sorts that would bring movies, TV and other Web video, a person familiar with the company’s plans says. With its own box, Amazon can feature its library of video instead of depending on other TV manufacturers.

Charles Keating, an Arizona property developer who bought a savings-and-loan and used it as a slush fund to gamble on junk bonds and real estate, has died at 90. We’d go into the rest of it, but you know it all already. If you’re too young, read it here.


He may have admitted to lusting for women other than Rosalynn, but these days Jimmy Carter is passionate about the plight of women in societies and religions where their subjugation is indoctrinated and institutionalized. In an interview with Pulitzer Prize-winning arts critic Manuela Hoelterhoff, the 39th U.S. president speaks of the improvement to life a simple water pump can mean to women who otherwise walk miles for fetid water, how religion contributes to a woman’s place in her community and how far religion has to go before women can achieve equality in leadership, sex trafficking, genital mutilation and more. Every one of us had a mother. Hardly any of us had one riddled with water-born parasitic worms.


No Republican had a greater role in the creation of the U.S. national parks system than Theodore Roosevelt, and his Antiquities Act of 1906 provided for the authority of the president to proclaim historic landmarks or natural treasures as national monuments. Which his is why the House’s passage on Monday of H.R. 1459, which limits that authority, strikes us as ironic. And petty. Do Republicans prefer loading up the Winnebago with the kids and the sunblock to spend a week at the oilfields? What is it? Is it the Obamacare thing again? What?


Did your kid get into Harvard or Princeton this week? Feeling pretty good about that? You should. Be proud. Just don’t take it too far, because while your college-bound teen is headed to an Ivy, 17-year-old Kwasi Enin from Shirley, New York, in Long Island’s Suffolk County, is (probably) headed to any of them. This kid got accepted to all eight Ivy League colleges, and now he’s in a position to play them off of one another to get the best financial-aid package. So far Princeton is offering the most aid, which stands to reason because of its generous policy. But wherever Kwasi goes and however well he does there, he still has to make it in the real world. We wish him luck.


There is voodoo at Citi Field. Even Mets who aren’t even Mets anymore are getting injured. Heading into an opening day win against the Nationals, the Amazin’s just needed one final strike from their closer Bobby Parnell. Instead he coughs up a double, the Mets go on to lose 9-7, and a day later Parnell is facing the prospect of elbow surgery. “It’s hard to believe, coming off of what happened with Matt Harvey’s injury last season,” says Jay Beberman, Bloomberg sports’ managing editor. “And then nine innings into this season, they’re going through it again. There are plenty of other issues with this team, but the injuries just won’t go away.”


It’s a shame Tiger’s streak of 19 consecutive years at the Masters had to be interrupted by pending surgery to correct a bad back, because no one can light up the galleries or TV ratings or betting lines like he can when he’s in the hunt, but in a way we’re relieved we won’t have to endure headlines like “Woods Trails Masters Lead by 11 Strokes as K.J. Choi Shoots 53, Saves Child’s Life With Ball Washer.”

To contact the reporter on this story: C. Thompson in Wilmington at

To contact the editor responsible for this story: Marty Schenker at

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