Michael Lewis, one of the more famous chroniclers of Wall Street, says that the stock market is “rigged” in a new interview with CBS’s “60 Minutes.”
“The United States stock market, the most iconic market in, in global capitalism is rigged,” said Lewis, who also wrote Liar’s Poker and The Big Short.
Lewis and others say high-speed computers give Wall Street powerhouses milliseconds worth of an advantage over regular traders.
Just that slight head start, Lewis says, can allow high-speed traders to figure out what other investors want to buy. Those traders can then buy up those stocks and sell them to the investor at a higher price.
High-speed traders might only get a penny or two out of each mark up. But with millions of trades per day, investors can quickly profit off the scheme.
“If it wasn’t complicated, it wouldn’t be allowed to happen,” Lewis said. “The complexity disguises what is happening. If it’s so complicated you can’t understand it, then you can’t question it.”
Even more than that, there’s nothing illegal about the trading, the author said.
“This form of front running is legal. It’s legalized front running. It’s crazy that it’s legal for some people to get advance news on prices and what investors are doing,” Lewis said. “It’s just nuts. Shouldn’t happen.”
The “60 Minutes” piece also featured an interview with Brad Katsuyama, a former trader at the Royal Bank of Canada who uncovered the high-speed trades.
Katsuyama recently helped start a new exchange to fight back against the high-speed trades and has gotten endorsements from financial titans like Goldman Sachs and David Einhorn of Greenlight Capital.
“It’s affecting millions and millions of people,” Katsuyama said. “People are blindly losing money they didn’t even know they’re entitled to. It’s a hole in the bottom of the bucket.”