In April 2014, best selling author Michael Lewis published FlashBoys, a narrative non-fiction depicting the rise of High Frequency Trading (HFT) and how financial institutions; brokerages and stock exchanges are involved in the HFT ecosystem.
As recent as the early 2000s, 85% of all stock trades in the USA happened on either one of two exchanges – NYSE or NASDAQ. The exchanges were exclusive; a stock that is traded on NYSE does not trade on NASDAQ.
In an attempt to promote freer markets, the Securities Exchange Commission (SEC) allowed more exchanges to spout. By 2008, there were 13 exchanges in the US. An investor could buy or sell a stock on almost any exchange of his choice.
More exchanges would normally mean more efficient markets, but as Brad Katsuyama, the protagonist of FlashBoys discovered, that was not the case.
Katsuyama is a Canadian trader who arrived in Wall Street with …