Is the stock market rigged? If you saw the 60 Minutes interview with Michael Lewis, the former Wall Street broker and author of Liar’s Poker, The Big Short, and Flash Boys, you know what he said. Lewis shocked many viewers last week when he asserted that “the stock market is rigged.” And it may be doubly shocking to my readers to know that I agree with him. Yes, the stock market is rigged against individual investors who are trying to compete with professional traders.
Lewis’ interview exposed a secret advantage enjoyed by professional traders who are employed by the largest brokerage firms. These traders trade with the benefit of high-speed fiber optic cable computer feeds that match buyers and sellers of securities. Some traders even trade in the same room as the New York Stock Exchange and Nasdaq servers. And still others pay extra for access to information on stocks that is not available to the rest of us. So much for a level playing field.
Lewis describes this situation as unfair because milliseconds matter in the market. And the timing advantage enjoyed by clients of the big brokerages can increase their profits – all at the expense of individual investors.
The good news is you don’t have to be a victim of these rigged Wall Street practices. Stay tuned. I’ll explain how to protect yourself in next week’s blog.