Flash Boys, published in 2014, is a classic must-read for anyone curious about how the capital markets machine works behind the scenes.
Michael Lewis pulls back the curtain on a stock market that had quietly become dominated by technology and speed, and the bad actors that created an uneven playing field, disadvantaging everyday investors.
If you liked The Big Short or Moneyball (both authored by Michael Lewis) then you’ll enjoy this true drama about the invisible world of high-frequency trading and the unlikely team that tried to fix it.
Here’s a summary of the book.
In The Beginning
In the summer of 2009 (shortly after the financial crisis), Lewis learned that the only employee from Goldman Sachs who was arrested was a high-frequency trader named Sergey Aleynikov, who was charged with stealing proprietary trading code.
This moment led Lewis to explore the intricacies of electronic trading and the emerging dominance of HFT firms.
HFT firms dominate trading volume in the market. According to Bloomberg, they make about 50% of trading volume in the U.S.1
Many people might think stock and bond market trading happens on the floor of the major exchanges, like the picture below (which was shown during the 60 Minutes episode on Flash Boys):
Most of the trading happens in hundreds of thousands of data centers in servers like the ones shown below:
High-frequency trading involves using sophisticated algorithms and high-speed data networks to scan the market and place trades in fractions of a second.
Some HFT firms capitalize on millisecond price discrepancies across different exchanges to try front-run orders.
Here’s how Michael Lewis describes front-running:
It’s not illegal insider trading. It’s just that someone sees your order coming and buys the stock milliseconds before you, only to sell it back to you at a slightly higher price.
It’s like someone cutting in front of you in line to buy the last concert tickets, then turning around and selling them to you for a markup.
The average investor would have no clue this was going on.
However, one Canadian trader discovered what was happening and dared to do something about it.
Unlikely Hero
Central to Flash Boys is the story of Brad Katsuyama, a former Canadian trader who worked at the Royal Bank of Canada (RBC).
Starting in 2007, he noticed that his trades were not being filled completely at the price he saw on his trading screen.
For example, let’s say Brad wanted to buy 10,000 shares of Microsoft for a client.
He saw he could purchase all 10,000 shares at $100 per share.
When he tried to execute this trade, only 5,000 shares were filled (i.e., bought).
A few seconds later, he noticed that the price had jumped to a higher price (say $100.05).
He would have to pay the higher price to purchase the final 5,000 shares.
He saw this happen for two years, with each successive year getting worse.
He first thought RBC’s technology was slow, but that wasn’t the problem.
He then went to one of the world’s largest hedge funds and learned they had the same problem.
Brad’s search for answers led him to Ronan Ryan, a networking expert who showed him how HFT firms placed their systems physically closer to exchange servers (using fiber-optic cables) to gain speed advantages.
These “proximity advantages” let them front-run orders from slower, unsuspecting traders.
By placing their systems closer to exchange data centers and utilizing direct data feeds, these firms could detect large incoming orders and execute their own trades milliseconds ahead, influencing market prices.
These were known as flash orders.
Brad’s RBC trading team found that they could route their orders to the major exchanges at roughly the same time, so no HFT firm could front-run their orders.
It worked. Their orders were being filled at the price they wanted.
Instead of exploiting this market inefficiency, Brad immediately said: “We have to go on an educational campaign.”
Knowledge is power. Knowledge shared is power multiplied. – Robert Boyce
A New Mission
You were never looking for the fight. The fight found you, and you decided to fight back.
– Michael Lewis talking to Brad Katsuyama.
In 2012, determined to counteract these practices, Katsuyama and a few of his team members founded the Investors Exchange (IEX).
IEX’s secret weapon was a 38-mile coil of fiber-optic cable known as the “speed bump.”
This “speed bump” delayed HFTs 350-microseconds to neutralize their speed advantage.
This leveled the playing field and ensured no trader could exploit speed advantages unfairly.
For context, 350 microseconds is 350 millionths of a second or 1/1000th the speed of your eye blinking.
The Backlash
When Flash Boys was released, it stirred immediate controversy.
Exchanges and HFT firms criticized the book, arguing that it misrepresented the role and benefits of high-frequency trading.
They criticized Brad and IEX, claiming they misunderstood the market.
The first time Brad ever appeared on television was on CNBC and got into a heated debate against the former president of the BATS Global Markets Exchange (YouTube: The great debate: combating HFTs image for more information).
The book sparked widespread discussions about market fairness and transparency.
In response, several exchanges implemented measures similar to IEX’s speed bump to curb potential abuses.
Final Thoughts
This is the story of restoring trust in the financial markets. - Michael Lewis
Brad Katsuyama didn’t just uncover a problem; he built a solution and nudged Wall Street to do better.
The story of Brad Katsuyama and IEX exemplifies how determined individuals can challenge entrenched systems.
They are leading by example.
Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has. - Margaret Mead
Thanks to Michael Lewis’s great writing, it was hard to put this book down.
Check it out when you can.
Footnote:
1: Wall Street’s High-Frequency Traders Are Rushing Into Saudi Arabia. Anto Antony, Matthew Martin. Bloomberg News. 5/15/25.
Now here’s what I’ve been reading, listening, and watching:
Joseph Pulitzer (the man who transformed newspaper consumption) on Founders
Estée Lauder (who gifted her products and made tell-a-woman her success story) on Founders
Just Keep Buying by Nick Maggiulli
The Seven Frequencies of Communication by Erwin Raphael McManus
The 5 Types of Wealth by Sahil Bloom
Children’s book (I have a 5-year old): Spanish Habbi Habbi Books
Here’s what I’ve been writing:
