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Thank you, Michael Lewis

Mary Jo White confirmed what everyone on Wall Street has been saying for weeks: Michael Lewis is dead wrong. Responding to a question about Mr. Lewis' controversial book, "Flash Boys," the SEC Chair told Congress: "The markets are not rigged … [they] are the strongest and most reliable in the world."

As the founder and CEO of an electronic market-making firm, you might think I'd be upset with Mr. Lewis for badmouthing my industry. In fact, I'm grateful to him for giving Wall Street something rare: an opportunity for those of us in the financial-services industry to work together for the greater good.

First and foremost, thanks to "Flash Boys," the vast majority of the financial-services industry is now singing from the same Haggadah. This is no small feat. Historically, banks, investors, and market makers like me haven't always seen eye-to-eye. Even in recent months, we've been at odds over the details of various proposed regulations and SEC pilot programs.

Michael Lewis's latest book, 'Flash Boys: A Wall Street Revolt,' tells the story of the Canadian banker who uncovered the underhanded and illegal practices carried out by some high-frequency traders on Wall Street.
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Michael Lewis's latest book, 'Flash Boys: A Wall Street Revolt,' tells the story of the Canadian banker who uncovered the underhanded and illegal practices carried out by some high-frequency traders on Wall Street.

Suddenly, however, important market participants have begun to speak up and voice their opinions on high-frequency trading, and many have come to its defense. For instance, Clifford Asness and Michael Mendelson, both principals at AQR — the kind of institutional investor Mr. Lewis claims high frequency traders are cheating — wrote in the Wall Street Journal: "How do we feel about high-frequency trading? We think it helps us." Dozens of diverse industry voices, from commodities trader Dennis Gartman to prominent market researcher and strategist Larry Tabb, have agreed.

Wall Street is a data-driven industry, which is a problem for Mr. Lewis, because he provides almost no data in "Flash Boys" to back up his incendiary claims. The result has been a groundswell of opinion rarely seen on the Street, which brings me to the second reason I'm grateful for the publication of "Flash Boys." Now that many of us have banded together, the industry can talk about something that really matters to the financial markets: stability.

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The modern market is far from rigged, but it's also far from perfect. Today, virtually all trading is electronic — a fact that not many everyday investors fully appreciate. In this all-digital marketplace, human error and technical meltdowns are a real concern. Incidents like the "flash crash" of 2010 (which the SEC determined was caused by human rather than machine error), the botched Facebook IPO, and Knight Capital's implosion, while rare, demonstrate the need for regulations that strengthen the marketplace and prevent these sorts of shocks and stresses.

In response to these incidents, the SEC has massively enhanced its market surveillance techniques to increase transparency and stability. For instance, their new MIDAS system provides real-time market tracking and analysis available through the SEC's website. The SEC has also proposed new regulations to increase the technical stability of the equities markets. Now, thanks to the publication of "Flash Boys," more people on the Street are discussing issues of transparency and stability than ever before. Mr. Lewis has given the industry and regulators a golden opportunity to improve the marketplace.

We also have the ability to increase the public's confidence in the stock market, so I'll say it again: Thank you, Michael Lewis, for giving Wall Street an opportunity to educate the general public about the modern marketplace.

The automation of the financial markets has been an overwhelmingly positive development. Not, as Mr. Lewis claims, for a few computer whizzes, but for everyone who invests. The new, digital marketplace has lowered broker fees, improved price efficiency, and facilitated the spread and transparency of information.


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Small investors have reaped these benefits as much as — if not more than — big investors. For instance, Gus Sauter, the former head of investment at Vanguard (another one of the traditional firms supposedly being preyed upon), told Bloomberg Businessweek that high-frequency trading saves his firm's customers about $1 billion a year. Fred Tomczyk, TD Ameritrade's CEO, recently told an industry conference: "The retail investor today is better off than they have been in history." Meanwhile, Blackrock, the largest money manager in the world, just released a report that concludes: "The U.S. equity market is one of the best functioning and most efficient markets globally."


The more the general public understands how the modern markets really work, the more confidence they'll have in buying and selling stocks. And that'll be a great thing for everyone — investors, public companies, and the American economy at large. That's why several competitors and I recently founded the Modern Markets Initiative, an industry group dedicated to educating the public about high-frequency trading and modern equities markets. Until recently, we didn't have the help of a bestselling author to raise awareness about how the marketplace has changed in recent years. Needless to say, while Mr. Lewis' conclusions are deeply flawed, we're very grateful for his help in raising the profile of our industry.

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Mr. Lewis has gotten many things right in the past — personally, I really enjoyed "Moneyball." With "Flash Boys," however, he's made baseless claims about how the modern markets work and what high-frequency traders do. Fortunately, he's also given investors of every size not only a chance to better understand the modern marketplace, but also to come together and make it stronger.


So, thank you, Michael Lewis. We appreciate the attention.

Commentary by Ari Rubenstein, co-founder and chief executive officer of Global Trading Systems, a New York-based automated market maker and financial technology firm.