Summary of Flash Boys Book by Michael Lewis

There is a big difference between the trading speed offered by exchange companies and the speed that is theoretically possible.

In practice, exchange companies take a longer time — a speed of as much as 16 milliseconds was once recorded. The fastest route traders have been able to access moves at 14.65 milliseconds on what they refer to as The Gold Route. If you find this route by some chance, you will be the first to profit from discrepancies between the prices in Chicago and those in New York.

Telecom markets could not comprehend the importance of a millisecond. For instance, the telecom company Verizon had no idea their connection speed was a valuable asset. The fact that their route moved two milliseconds faster made them worth a fortune. The variation in connection speed was because the date route moved in a zig-zag pattern across roads and railroads. A straight, wired path between Chicago and New York would yield a greater connection speed.

Hence, Dan Spivey, a trader on the Chicago Board Options Exchange, set out to achieve this himself. He got the necessary permissions and funds to start company spread networks. The one thing he never anticipated was that traders at Wall Street would not appreciate the importance of a millisecond and, as a result, would not want to buy their line. The success of Verizon’s product depended heavily on the scarcity of faster connections.

By 2010, Verizon was still constructing; they didn’t have a single prospective buyer. They kept their operation a secret to maximize the line’s value and prevent copycats from replicating their work. They waited three months to the completion date before advertising and contacted the most highly paid men on Wall Street, and the first reaction of many was total disbelief.

In the remaining chapters of this summary, you will discover how computer programming and connection speeds became technological tools that gave undue advantage to traders who knew how to leverage them. Also, you’ll see how the telecommunication industry got rich because of Wall Street. The toll trading speeds took on the stock market and how insider trading disrupted the ebb and flow of the institution are also duly addressed.