60 Minutes Expose: U.S. stock market rigged?

Did you happen to catch 60 Minutes on CBS on Sunday? Their lead segment was entitled, “Is the U.S. stock market rigged?” and featured Michael Lewis’s new book about high frequency trading.

 

Very interesting.

 

If you’re an investor, you need to check it out. Or read Lewis’s book called Flash Boys. Or both.

 

Here’s an excerpt from the piece.

 

60 Minutes:  What’s the headline here?

 

Michael Lewis:  The United States’ stock market is rigged.

 

60 Minutes:  By whom?

 

Michael Lewis:  By a combination of the stock exchanges, the big Wall Street banks, and high-frequency traders.

 

60 Minutes:  Who are the victims?

 

Michael Lewis:  Everybody who has an investment in the stock market.

 

60 Minutes:  High-frequency traders, big Wall Street firms and stock exchanges have spent billions to gain an advantage of a mili-second for themselves and their customers – just to get a peak at stock market prices and orders a flash before everyone else, along with the opportunity to act on it.

 

Michael Lewis:  The insiders are able to move faster than you… they are able to see your order and play it against other orders in ways you don’t understand… they are able to front-run your order.

 

60 Minutes:  What do you mean, front-run?

 

Michael Lewis:  It means they are able to identify your desire to buy shares in Microsoft — and buy them in front of you — and sell them back to you at a higher price. It all happens in infinitesimly small periods of time… sometimes fractions of mili-seconds. But it’s enough for them to identify what you’re going to do and do it before you do it at your expense.

 

60 Minutes:  So it drives the price up.

 

Michael Lewis:  It drives the price up. And in turn you pay a higher price.

 

If you missed the show, you can watch it online at: (http://www.cbsnews.com/news/michael-lewis-stock-market-rigged-flash-boys-60-minutes/ ).

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