1215095 – The Flash Boys Mystery Solved



The blog posts and defenses of high frequency trading in the past week have come with dizzying high frequency. They have taken the form of blog postings by knowns (Larry Tabb) and unknowns (Scott Locklin). Reuters, who sells high speed data, has a very influential blogger (Felix Salmon) who criticized the book before he read it. Bloomberg, who also sells high speed data, has a blogger (Matt Levine) who defends high speed trading almost daily. Modern Markets Initiative – the HFT Lobbying Group – has been writing/tweeting a blog post per hour criticizing Flash Boys. Even Irene Aldridge has weighed in very negatively on Flash Boys – again, without even reading the book. She has even gone so far as to accuse Michael Lewis of taking a secret payoff to write an anti-HFT book.

Boy… some guys say the R-word “rigged” and Charlie Munger’s rats in the granary start to panic and squeal! Flash Boys has struck many a nerve; the truth can be a bitter pill at times. And of course, the pro-HFT defenses are all made by many who are very, very staked in the status quo of our market structure.

Now, bloggers using twitter is one thing; conflicted insiders using television to make their HFT defenses are another. Manoj Narang is such a conflicted insider – which brings us to the number 1215095, which is the title of this morning’s note.

Flash Boys closes with this paragraph:

The application to use the tower to send a microwave signal had been filed in July 2012, and it had been filed by … well, it isn’t possible to keep any of this secret anymore. A day’s journey in cyberspace would lead anyone who wished to know it into another incredible but true Wall Street story of hypocrisy and secrecy and the endless quest by human beings to gain a certain edge in an uncertain world. All that one needed to discover the truth about the tower was the desire to know it.

Michael Lewis is referring to the microwave tower in Pennsylvania with the FCC license number 1215095. It is located in Potter Township, PA (Lat: 40.849278 Lon: -77.710778) The tower is used to beam stock quotes between Chicago and Cartaret, NJ faster than even the fiber optic cable laid by Spread Networks (which Spread laid because it wanted to make faster the transmission of the same stock quotes than the prior mechanism which included slower fiber cable routes). Many now argue that the microwave networks being deployed to speed up stock quote transmissions are actually makes the Spread Networks fiber route obsolete.

Who owns this tower? What about who owns this tower is mysterious, conflicted, and hypocritical?

Manoj Narang, or the entities he has stakes in, owns the tower. The application for the microwave device was filed by Converge Towers LLC, which is located at 770 Broadway, Second Floor. And while Converge Towers LLC is a subsidiary of BCG Cantor Fitzgerald, the application was filed by a misses Elizabeth Kim, who works at Thesys technologies (BCG Cantor – Thesys partnership?) (This is an interesting blog post you should look at by the way… particularly the comments section).

Who is Thesys Technologies? Thesys is an affiliate of Tradeworks, the Red Bank, New Jersey HFT operation that was hired in 2012 to license the MIDAS system to the the SEC. MIDAS, if you recall, is the data solution involving fast feeds that gives the SEC its ability to monitor quotes and trades at the same speeds the HFT firms do. Tradeworx not only provides the SEC with the fast feeds to view the limit order book as HFTs do, it also provides the analytic tools, and the framework and context to draw conclusions. MIDAS also powers the SEC’s market structure website, which consistently puts out analysis that demonstrates that HFT is not the villain it is portrayed to be.

Read this NYT 2012 article by Nathaniel Popper about Narang’s firm, and its relationship with the SEC. From that article:


–          MIDAS was created by Manoj to “help regulators respond to critics of high-speed trading.” This bias in its deployment perhaps explains what some might view as HFT-friendly findings by the SEC to date.

–          MIDAS cost the SEC $2.5 million up front, plus recurring fees. It is rumored to be higher than that, with the scope of the program  much larger than initially reported.

–          The S.E.C. will still not have the complete picture; it won’t have information on the trades executed in dark pools. MIDAS does not provide that.

–          The Tradeworx- SEC initiative is supposedly  managed by Glenn Nixon – who came from the Princeton Physics program.

–          Tradeworx makes a ton of money selling data and technology to other trading firms, including microwave towers that beam trading data to Chicago, a faster method of transmission than fiber optic cables.


Manoj’s Tradeworx and Thesys is also partnered with NASDAQ. They just recently signed a major deal that would allow them both to sell algo-testing to NASDAQ’s high speed clients, starting this year. This is in addition to the microwave thing…

With that Tradeworx – Thesys –  Manoj – Midas – NASDAQ context, watch Narang tell Bloomberg Television that speed matters less in today’s markets than it ever has in the history of markets. (15:35 in). So says the man selling speed to the SEC (the American taxpayer), HFTs, and Stock Exchanges. You can’t make this stuff up. It would be humorous if it were not so sad.

Is it any wonder that the SEC has trailed other law enforcement and political entities in examining flaws and abuse in our markets?  The tools that they have procured are sold to them by an HFT firm. That HFT firm makes even more money selling microwave high speed trading transmission to other HFTs and exchanges. You would think such in-your-face conflicts would have made the SEC think twice about their partnership with Tradeworx. You would think the SEC would especially be embarrassed by the appearance of bias from one of their partners/representatives tainting the Flash Boys debate on public television, as Manoj has done all of last week. You would think that the SEC, a body so interested in proper disclosure, would have something to say about Manoj not publicly disclosing his relationships with so many that are entrenched in the status quo.


What is the answer to Michael Lewis’s riddle at the end of Flash Boys? Who owns the Pennsylvania tower with FCC license number 1215095? Tradeworx does. Manoh Narang does. The creator and SEC-entrenched high speed data seller does. 

There were actually two words thrown around in the media all of last week. One of them was rigged; the other was shame. Perhaps this week we all should focus on the S word, and forget the R word.

PS – Please do not let it be lost that Lewis did not come out an tell you who owns the tower with FCC License No. 1215095; he wanted you to care enough to find out yourselves. Change will come only if you care enough to dig, and talk, and be vocal. Powerful.