One of my guests, he goes by John the Watch (he services and repairs high end watches), told me about bits of a mid-19th century transatlantic cable he found off the coast of Valentia Island. It was used to transmit telegrams between Ireland and Canada - the first took over 16 hours to transmit. This led me to watch High Risk and High Reward of Undersea Cables on Bloomberg Television. The segment referred to the book, Flash Boys: A Wall Street Revolt by Michael Lewis.
In the mid-1990s, as a salesman of custom communications cable assemblies, I met someone at Reuters who detailed the value of news to the financial industry. News or market data is more valuable the closer it is to the event and the financial institutions who were my customers paid billions for its speedy delivery so that they could make informed investment decisions. Almost all of it delivered over cables. Flash Boys opens with the laying of fiber optic cable in as straight a line as possible between New York/New Jersey and Chicago. The purpose of this cable was to reduce latency, the time it takes for data to go from Point A to Point B. You may be thrilled by the latency of your high speed Internet for gaming and streaming. It's measured in milliseconds. The High Frequency Traders (HFTs) who would use that long-distance cable measured latency in micro and even nanoseconds.
"Some large amount of what Wall Street had done with technology had been done simply so that someone inside the financial markets would know something that the outside world did not."
HFTs use sophisticated algorithms to exploit financial markets. These private firms anticipate large trades of securities and detect tiny price discrepancies to execute trades on their own behalf at lightning speeds across long distances. Flash Boys details how these self-dealing traders effectively know the news the instant it happens. This may be legal, but is it ethical? The book culminates with the formation of a new stock exchange, Investors Exchange (IEX). IEX counters the potentially catastrophic consequences of high-frequency trading with a technological speed bump to do something maybe all of us need to do: slow down. Flash Boys reminded me of my days of selling "high tech" communications hardware. I would have been more successful if I had focused more on understanding my customers than on the technology. They all wanted to go faster, at light speed if possible. Now I know why.