Broken Markets

08/27/2012 · No Responses

The markets have evolved at breakneck speed during the past decade, and change has accelerated dramatically since 2007’s disastrous regulatory “reforms.” An unrelenting focus on technology, hyper-short-term trading, speed, and volume has eclipsed sanity: markets have been hijacked by high-powered interests at the expense of investors and the entire capital-raising process. A small consortium of players is making billions by skimming and scalping unaware investors — and, in so doing, they’ve transformed our markets from the world’s envy into a barren wasteland of terror.

Since these events began, Themis Trading’s Joe Saluzzi and Sal Arnuk have offered an unwavering voice of reasoned dissent. Their small brokerage has stood up against the hijackers in every venue: their daily writings are now followed by investors, regulators, the media, and “Main Street” investors worldwide. Saluzzi and Arnuk don’t take prisoners! Now, in Broken Markets, they explain how all this happened, who did it, what it means, and what’s coming next. You’ll understand the true implications of events ranging from the crash of 1987 to the “Flash Crash” — and discover what it all means to you and your future. Warning: you will get angry (if you aren’t already). But you’ll know exactly why you’re angry, who you’re angry at, and what needs to be done!

From the Back Cover
“Read this book before you invest a penny in the stock market.”
—Mark Cuban, Owner, Dallas Mavericks

“In one of the most memorable scenes in motion picture history, before giving him the red pill, Morpheus says to Neo, ‘You’re here because you know something. What you know, you can’t explain, but you feel it. You’ve felt it your entire life—that there’s something wrong with the world. You don’t know what it is, but it’s there, like a splinter in your mind, driving you mad.’ Although Arnuk and Saluzzi will not expose every dark corner of the ‘matrix’ that our capital markets have become, they will provide the clues to aid you in your quest to understanding just why more people withdraw from trading fully aware that ‘there’s something wrong.’ Morpheus also asks, ‘Do you want to know what it is?’ To all who answer yes and take the red pill, read this book.”
—Tyler Durden, Zero Hedge

“Markets now trade at the speed of light, apparently benefiting Wall Street ultra-short-term traders over long-term investors and causing more than a few ‘flash crashes’ along the way. Arnuk and Saluzzi intuitively piece together how High Frequency Trading, for-profit exchanges, fragmentation, regulatory changes, and a ‘need for speed’ over the past 20 years have dramatically shifted benefits from investors to short-term traders in our increasingly fragile markets. A must read for anyone concerned about investors, trading, and the long-term health of U.S. stock markets.”
—Professor Michael Goldstein, Professor, Finance, Babson College

“Arnuk and Saluzzi are the Woodward and Bernstein of the securities markets. Their gutsy, dogged sleuthing exposed the perverse market effects of robotic trading and predicted an event like the Flash Crash 2010, long before blinkered market regulators had a clue. The two crusaders deserve a medal for looking out for investors.”
—Jim McTague, Washington Editor, Barron’s

“Who broke the stock market? The NYSE and NASDAQ, that’s who. They sold the investing public down the river so colocated algo driven servers of high frequency traders could steal billions by front running grandma’s mutual fund. The horrific truth about this legalized theft is all here in black and white. Read it, and you will never so much as invest one thin dime in U.S. equities again.”
—Barry Ritholtz, CEO, FusionIQ; Author, Bailout Nation and The Big Picture website; Bloomberg personality

“The authors explain in wonderfully clear language how, instead of banning card counters as they do in Vegas, Wall Street has remade itself to not only stack the deck in the card counters’ favor, but to enable them to do so via ever-faster computer networks and algorithms, that leave not only ordinary investors but many sizable institutions, like pension funds, with worse odds than on a lottery ticket. There’s more, much more, in Arnuk and Saluzzi’s book; it’s quite simply a must read, if you care about your capital—or the future of our capitalist economy.”
—Kate Welling, Former Founder, Editor, and Publisher, Weeden & Co. LP, Welling@Weeden; Former Managing Editor, Barron’s

An eye-opening view on the way stocks are really traded today—and why the stock markets are broken and desperately need to be fixed. Written in an easily understandable style, the authors explain:

The strategies and tactics high frequency traders use to scalp pennies off of nearly every retail and institutional share traded
How the stock exchanges provides high frequency traders with powerful tools that give them an advantage over retail and institutional investors
Why the stock markets no longer accurately price the values of the securities in your portfolio
What you can do to prevent these and other problems from getting any worse

Authored by the Wall Street traders who figured out how high frequency traders were harming retail and institutional investors and explained how it all works on 60 Minutes, Bloomberg TV, CNBC, and Fox Business News

Learn

Why retail investors are pulling their money out of stocks in unprecedented amounts
How decades of regulation created the broken markets we have today
Why there are more than 40 exchanges, sub-exchanges, and dark pools rife with conflicts of interest where stocks are traded today
How the stock exchanges became for-profit companies and fundamentally changed market structure
Why the Flash Crash happened—and why it will happen again
How there are two markets—the fast, accurate one that high frequency traders see and the slower one that retail and institutional investors see