NEW YORK, NY, May 30, 2012 – The Flash Crash of May 2010…The failed BATS IPO……The Facebook Fiasco of May 2012… The lowest trading volumes in recent memory…The biggest withdrawals from the stock mutual funds in American history…. What do all of these events have in common?
They have occurred because stock markets in the U.S. are broken, say professional traders Sal Arnuk and Joseph Saluzzi, in their new book, Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street are Destroying Investor Confidence and Your Portfolio (FT Press, $34.99, 336 pgs., ISBN-13: 9780132875240).
Starting today, the book is available in digital formats from Kindle Store at Amazon, BarnesandNoble.com, the iBookstore, FTPress.com, and InformIT.com. More e-tailers will follow soon. Hardcover copies are available for pre-order.
Jim McTague, the Washington Editor for Barron’s, calls Arnuk and Saluzzi “the Woodward and Bernstein of the securities markets.” Written in an easily understandable style, the authors explain how a combination of new regulations and technology has:
•Drastically undermined the market’s structure
•Put retail and institutional investors and publicly traded companies at a disadvantage
•Made it extremely difficult for new companies to raise capital to grow
•Increased risk, volatility and correlation between asset classes
•Given an inside edge to high frequency traders (HFTs)
“The market has been hijacked,” Arnuk and Saluzzi write. “An evolved class of leveraged short-term, high-speed traders, sometimes called high frequency traders, who trade massive numbers of shares based on proprietary algorithms, has eclipsed other types of traders. Not all the stakeholders have realized this or the implications of these changes.”
In 2007, Arnuk and Saluzzi began investigating problems with the market as it became increasingly difficult to trade stocks for their clients, who include institutional managers of pension funds and 401k money. The authors found:
•There are two ways to see stock market prices. There is the fast, accurate way that high frequency traders use in order to scalp pennies off retail and institutional investors, and there is the slow, mispriced way that institutional and retail investors are forced to rely on.
•Stock exchanges now sell or give away data to attract lucrative business from HFTs. In turn, HFTs use this data to trade against hidden institutional orders.
•Stock indexes that the world relies upon are calculated during the trading day using less than 30% of all trades in component stocks, creating additional opportunities for high frequency traders.
Arnuk and Saluzzi are hopeful, but cautious about the future. “Regulators and legislators have begun to take some first steps to seriously examine the problems we have articulated in our book,” they say. “These are encouraging signs, but in the past, we have seen many initiatives fall by the wayside.”
About the Authors
Sal Arnuk and Joseph Saluzzi own and manage Themis Trading LLC, an institutional brokerage firm. They are experts in electronic trading and market structure, frequent contributors to CNBC and Bloomberg TV, and their views have been published in The Wall Street Journal, New York Times, USA Today, Los Angeles Times, and The Financial Times, as well as trade publications and quoted by market reporting writers. Saluzzi was a key part of a prime time 60 Minutes segment on high speed trading. Before founding Themis, for nearly a decade they were associated with electronic trading pioneer Instinet and with Morgan Stanley. Arnuk’s and Saluzzi’s opinions are sought by leaders, regulators, and market participants, and presented via their widely-read blog.
About FT Press
FT Press (www.ftpress.com), an imprint of Pearson, publishes high quality books in the areas of General Business, Finance and Investing, Sales and Marketing, Leadership, Management Strategy, Human Resources, and Global Business. Our brand is built on the concept of signing and publishing the world’s best minds on the most relevant topics.
About Pearson Education
The global leader in education services and technology, Pearson is home to such respected brands as FT Press (www.ftpress.com), Addison-Wesley Professional, Cisco Press, Exam Cram, IBM Press, Prentice Hall Professional, Que, Sams Publishing, which have as their online publishing arm, InformIT (www.informit.com) – The Trusted Technology Learning Source. Pearson is also co-founder, with O’Reilly Media Inc., of Safari Books Online (http://safari.informit.com), the premier on-demand technology content library providing thousands of expert reference materials through a single point of contact, including expert technology, creative and design, industry and management resources in video, audio and written formats. Pearson Education is part of Pearson (NYSE: PSO), the international media company. Pearson’s other primary businesses include the Financial Times Group and the Penguin Group.
For The Authors: Michael Shallo of Anreder & Company at 212-532-3232 or michael.shallo@Anreder.com
For FT Press: Megan Graue of FT Press at (317) 428-3109 or firstname.lastname@example.org