Updated, 7:07 a.m. | The author Michael Lewis, who has written in previous books about everything from subprime mortgage securities to the Oakland As, is now taking aim at a dominant force in the stock market: High-frequency trading.
Mr. Lewis, whose new book, “Flash Boys,” is scheduled to be released on Monday, appeared on “60 Minutes” on Sunday evening to argue that high-speed trading has ripped off investors not in possession of lightning-fast computers and special cables.
“The United States stock market, the most iconic market in global capitalism, is rigged,” Mr. Lewis told Steve Kroft on the CBS News program.
“If it wasn’t complicated, it wouldn’t be allowed to happen,” he went on. “The complexity disguises what is happening. If it’s so complicated you can’t understand it, then you can’t question it.”
The book is sure to generate attention on Wall Street. Mr. Lewis, the author of popular books like “Liar’s Poker,” “The Big Short” and “The Blind Side,” argued on the “60 Minutes” segment that high-frequency traders are able to “front-run” other investors, by quickly spotting orders and positioning themselves to take advantage of them.
This computerized trading, which is estimated to account for half the shares traded in the United States, has already drawn scrutiny from the New York attorney general, Eric T. Schneiderman, who has publicly criticized certain advantages that the traders enjoy. Earlier this month, Mr. Schneiderman called on stock exchanges to curb certain services for high-frequency traders, including the ability to put their computer servers within the exchanges’ data centers.
Defenders of high-frequency trading say that the practice makes trading easier and cheaper for investors of all kinds. The rise of new trading technology, combined with new regulations, helped erode the old model of specialists who would collect spreads of as much as 12.5 cents a share to ensure the smooth functioning of the market.
Mr. Lewis, in his new book, follows the story of Brad Katsuyama, a former trader at the Royal Bank of Canada who helped create a system to slow down customers’ orders to stymie high-frequency traders. The technology sought to ensure that orders reach all exchanges at the same moment, Nathaniel Popper wrote in DealBook last year.
An excerpt of the book, published Monday in The New York Times magazine, also outlines how Mr. Katsuyama stumbled across the problems with high-frequency trading.
Now, Mr. Katsuyama runs a new trading platform called IEX, which is designed to be inhospitable to “predatory” high-frequency traders. The “60 Minutes” segment did not include any interviews with high-frequency trading firms, but did present Mr. Katsuyama as the hero who conquered high-speed traders. One investor in the company is the hedge fund manager David Einhorn.
“I think it’s going to succeed in a very big way,” Mr. Einhorn said on the program.
Mr. Katsuyama, a young Canadian who formerly made millions as a trader, might seem an unlikely hero in this story, Mr. Lewis said.
“Why is this kid, why is he able to all of a sudden sit at the center of the American stock market?” Mr. Lewis said. “And the answer is, when someone walks in the door who is actually trustworthy, he has enormous power. And this is the story of trying to restore trust to the financial markets.”