Michael Lewis’ new book Flash Boys, which was released today and opened at No. 1 on Amazon, is already attracting fierce criticism, including an email that has been circulating today written by the head of electronic execution at BNP Paribas, John Nunziata.
Nunziata sent an email to clients obtained by BuzzFeed saying that Lewis “has a stake in IEX, which was not disclosed in the story.”
Gerald Lam, a spokesman for IEX, told BuzzFeed, “Michael Lewis is not an investor in IEX.” In a Facebook post, Lewis said, “I have no such stake.”
Requests to Nunziata and BNP Paribas’s press office were not returned.
BNP Paribas has a variety of algorithmic trading products, mostly in foreign exchange, including one called Cortex iX, which “uses artificial intelligence concepts and multiple sets of execution rules, and is able to adapt its behavior mid-execution,” according to the trade publication FX Week.
Lewis’ book chronicles the rise of high-frequency trading in the stock market. Lewis said in an interview with 60 Minutes last night that the algorithmic trading programs have “rigged” the U.S. stock market. Critics of high-frequency trading say that by literally setting up their computers closer to the physical location of exchanges and other tactics, the high-frequency traders are able to see orders from institutional traders and build in a guaranteed profit by trading ahead of them.
“The United States stock market, the most iconic market in global capitalism, is rigged,” Lewis said on 60 Minutes, “by a combination of the stock exchanges, the big Wall Street banks, and high-frequency traders.”
The book profiles Brad Katsuyama, a former Royal Bank of Canada trader who founded an exchange, IEX, that is specifically designed to erode the advantages of high-frequency traders. Katsuyama started IEX because while at RBC, he would try to buy stocks on behalf of clients and more and more, the orders couldn’t be filled at the posted price.
Update — 7:05 PM ET Sally Lyden, a BNP Paribas spokesperson emailed a statement: “Earlier today an email was sent by John Nunziata, internally within BNP Paribas, which was factually erroneous and contained incorrect information regarding Michael Lewis. The statements did not and do not represent the views or understanding of BNP Paribas. BNPP and its staff have no reason to believe that Mr. Lewis has any financial or proprietary interest or other stake in IEX, and any statement to the contrary was a mistake and is retracted in its entirety.”
Here’s the full email:
As many you saw last night on 60 minutes or are hearing about today, there is a “new” exchange IEX to combat High Frequency Trading. IEX is being sponsored and pushed by buy-side firms as they are the main investors and believe in the story. Michael Lewis also has a stake in IEX, which was not disclosed in the story. IEX is currently “transitioning” from a dark pool to a lit exchange. So where does BNP stand with connectivity to IEX?
BNP will access IEX via two separate connections. This is different than most connectivity we maintain as we will have a direct connection and integration into our dark pool strategies. These connections will be completed at the end of the week as all paperwork is submitted to IEX and we are awaiting production validation and release.
BNP clients will be able to access IEX directly through BNP connectivity once their EMS is certified with these updates via our electronic offering. The trading desk will also have the ability to enter orders directly into IEX via Optime upon customer’s requests.
Dark Pool Integration
BNP has also added IEX as a destination on our proprietary dark pool strategies Dark and Dark Plus. This functionality is currently available to electronic and high touch clients.
Please reach out if you have any additional questions.
Have a good week.
- Monday night's first presidential debate between Donald Trump and Hillary Clinton was a horse show for undecided voters.