Is Michael Lewis Right That the Markets Are Rigged?

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March 31 (Bloomberg) -- Lightspeed Trading Former CEO Steve Ehrlich and Yale University’s Stephen Roach discuss high frequency trading on Bloomberg Television’s “Bloomberg Surveillance.” (Source: Bloomberg)

What michael lewis has said.

High-frequency trading certainly makes up a bigger part of the stock market than it did a few years ago.

I don't think the market is rigged.

I do think, as i stated before, you have an issue with phantom orders.

Things he brings up in the book.

I think that is a problem.

You go to execute an order and it is not there anymore.

Who gets victimized in that situation?

We are pointing a lot of fingers and saying retail, but most using the retail platform are sending in order to a market maker using a high-frequency strategy behind that.

They are protected.

Those orders are protected.

This is not about the little guy?


who is it about?

The institution.

He wants to sell a book, he goes on tv saying it is about the little cai -- little guy.

You saying he is wrong?

Steve roach likes the quality of the chinese execution in beijing . high-frequency trading?

This is just journalistic sensationalism.

Flash traders are bit players compared to the biggest rigor of all, the fed.

The idea that the market is rigged makes it sound like some computer is in a backroom conniving to squeeze this guy or that guy.

Remember quoting, eight, half scope ?s? i remember seeing you on the floor.

I was this tall.

But within that, arthur levin who has been there forever, he is like you, ambivalent as to how important this is.

What did they miss about the heat of this debate?

There is no doubt, talking about 8, 16, you had spreads that were rider and -- spreads that were wider.

The cost to retail customers was huge.

Ira number paying $150 for a 100 share order.

Now you pay less than $10. and then you had to wrap your head around steeped.

Explain to me why the system is not rigged.

The system is not rigged because i think you do need hft.

Meaning high-frequency traders for liquidity.


You have seen the flash crash.

You have seen the volume tapering off.

What about the assertion that michael lewis makes in his book regarding companies providing access to exchange's three milliseconds faster.

That sounds like a race to me.

There has always been met with automated electronic trading.

We have talked about that for years.

Look, this is about margins on transactions, not price levels.

The word rigged makes it sound like someone is inflating or deflating the overall price level.

That is just incorrect.

Steve, when you look at this and you look at the assertions of raid, you feel as an investor, as a retired from morgan stanley working for -- working full-time that you can go into the market and get full price?

If i don't get down to the last -- i don't care.

Do they teach scientific notation at yale?

I don't think so.

What is the number one thing i need to know, steve?

That they are getting a fair execution every time they execute their order.

Steve, thank you so much.


lewis, joining bloomberg television, look for him

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