by Lee Munson
I love you, New York City, but you're killing me. There's a reason I stay in my remote third world country called New Mexico.
The media focus on Michael Lewis' new book, "Flash Boys: A Wall Street Revolt," irritates the hell out of me.
Lewis wants everyone to get worked up about high-frequency trading (dubbed HFT for short). Balderdash. This is an old subject with little relevance to individual investors.
Here's what is a lot more dangerous than HFT: Overtrading, not having a plan, and too much focus on short-term performance.
It's time someone took a big stick and beat this HFT nonsense.
First off, Lewis exaggerates.
He gives a false example when trying to convince you, the individual investor, that HFTs are making you pay more.
Stop, go out and buy 10,000 shares of MSFT right now in your discount brokerage firm account. Okay, that came out wrong. Don't actually do that, but go to any quote system -- perhaps CNNMoney.com (hint hint) -- and notice the volume on the bid and ask. The spread is likely a penny, and plenty of shares are changing hands every second and the price isn't moving that much.
Plus, larger brokerage firms are crossing clients' orders between each other when they can. You're probably swapping your 100 shares of Tesla with your uncle in Tacoma, and you don't even know it.
Second, who cares?
The case is being overstated by Lewis to the point of scaring people from actually investing. He's screaming: "The market is rigged." We know that. But the HFTs are not making nearly the amount of money being suggested.
You are not being gouged a buck a share to invest in stocks (well, at least not by HFTs. Have you checked your broker's fees?).
Remember 15 years ago when there was something called fractions? Before decimalization, spreads were 3,6,12 cents. That increased trading costs a heck of a lot more than HFTs. The fact that Microsoft stock has a mere penny spread nowadays is a huge gain to all investors...everywhere.
It has never been cheaper to trade in the history of the world. If some trader using a fast computer makes you magically pay a penny more, you are still in very, very good shape.
Third, supply and demand still exists, and so do speculators.
Traders can punish a stock in the short term. They can also see, at lightning speed or not, when a big institution is trying to buy a bunch of shares.
Who the heck said Brad Katsuyama, the "hero" of Lewis' book, is entitled to get his orders filled and not move the market? Let's get real: Every trade has the potential to move the market.
Electronic trading allows big players to minimize the impact of large orders versus the past. But any savvy speculator will notice when someone has a big appetite and will buy that for a free ride.
Here's the bottom line: HFTs aren't the problem.
Okay, sponsored access of "flash" trading is repugnant. By that I mean that trading firms paying money to have their computers and servers right next to those of the exchange is a step too far.
If this book makes regulators write a rule saying you can't do sponsored flash trading, fine. But that is not the definition of HFTs.
There will always be a cat and mouse game between new technology and what is right. However, yelling fire in a crowded theater is not productive.
High-frequency trading is the talk of Wall Street this week, but it turned to high-frequency blows today when Michael Lewis went on CNBC to discuss his controversial new book "Flash Boys".
Lewis appeared with Brad Katsuyama, one of the few heroes in his book, to discuss the issues with rapid trading and whether the stock market is "rigged".
Things got a little heated when the president of BATS Global Markets, a stock MOREApr 1, 2014 3:50 PM ET
Bond king Bill Gross says it's time for individual investors to get used to a new (and slower) dance.
In his monthly investment outlook letter, the founder of Pimco and manager of the world's largest bond fund, Pimco Total Return Fund (PTTRX), wrote that the age of credit expansion that led to double-digit portfolio returns is over, and the age of inflation has begun.
And that means investment returns from both stocks and MOREHibah Yousuf - Sep 5, 2012 2:07 PM ET
SEC Chairman Mary Schapiro let it be known Friday that the market regulator has taken up the gauntlet thrown down by Knight Capital's act of errantry.
The Securities and Exchange Commission will convene a "roundtable" in the coming weeks to address the "critical issues" raised by Wednesday's high-frequency foul-up, Schapiro proclaimed in a statement.
As if that weren't enough, Schapiro has also commanded SEC staffers to speed up efforts to make sure MOREBen Rooney - Aug 3, 2012 4:48 PM ET
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
Technology is a great thing until it runs amok. That's the plot line of scores of good (and bad) sci-fi novels and movies. But it's also the sad reality for investors.
The Knight Capital Group trading glitches MOREPaul R. La Monica - Aug 2, 2012 12:12 PM ET
Not a member yet?Sign up now for a free account
|Why some NFL jerseys are getting a new look|
|The Obamacare tax penalty isn't dead yet|
|SALT deductions: Making sense of new state and local tax caps|
|Anjali Sud was rejected from dozens of investment banks. Now she's the CEO of Vimeo|
|Google admits its new smart speaker was eavesdropping on users|