Flash Boys Flash Poll:

Impact of the latest Lewis book

With an appearance on 60 Minutes and an excerpt in the New York Times Sunday Magazine, Michael Lewis is going full bore on the PR for his new book Flash Boys. Aiming a critical eye on high frequency trading (HFT), the book is likely to create controversy and discussion inside and outside the industry. A week prior to the books release date, TABB Group launched a poll on the industrys expectations for the impact of the book. We also asked participants to play casting director for the inevitable film version of the book. (Recent news is that The Big Short is going celluloid.) The highlights of our poll include: One-third of the buy-side believe the book will lead to substantial, long-term change. Participants believe IEXs Brad Katsuyama should be played by Christian Slater in the movie adaptation of the book. About of a third of participants believe IEX has the most to benefit from the publicity surrounding the book. Market structure confidence has strengthened for the first time in three years, slightly up since April 2013.

Valerie Bogard V12:021 April 2014 www.tabbgroup.com

Flash Boys Flash Poll: Impact of latest Lewis book

April 2014

Introduction
The term high-speed trading will soon go the way of sub-prime mortgages as a buzzword for how the industry has created an unfair playing field. For better or worse, Michael Lewis has unleashed a new wave of attention on Wall Street with his new book, Flash Boys: A Wall Street Revolt, which was released on March 31st. As the industry prepares for the whirlwind, an overwhelming majority plan to read the book, although prop trading groups were even more likely to read it right away with 53% saying ASAP and 43% in the queue. The buy-side was most likely to say it is in queue, though someone wrote to us privately to say it depended on whether the book could be soft dollared. Others will be waiting for the inevitable movie, but more on that later. Lewis will be happy to know that as of yet, the industry hasnt be cheating him out of his commission by downloading bootleg copies (see Exhibit 1).
Exhibit 1 When will you read Flash Boys?

Source: TABB Group We know that W.W. Norton probably spent millions of dollars testing different names for the book, but we decided to test out some of our own anyway (see Exhibit 2). Some of TABBs favorite write-in alternatives were Flash Dancers and The Need for Speed.

Exhibit 2 Favorite alternative title to Flash Boys

Source: TABB Group 2014 The TABB Group, LLC. All Rights Reserved. May not be reproduced by any means without express permission. |

Flash Boys Flash Poll: Impact of latest Lewis book

April 2014

TABB Group asked survey participants a host of other questions about the book, high frequency trading and market structure, detailed in the following pages. The data is from 315 responses collected between March 24th to March 31st. Participants self- selected the type of firm where they are employed and represented a wide variety of firms across the industry. Broker/dealers were the largest participating group, followed by tech vendors and consultants (see Exhibit 3). Most questions are multiple-choice, but we offer Other and a write-in response. The survey was distributed to TabbFORUM members, which is heavily skewed toward the institutional community.

Exhibit 3: Breakdown of survey respondents

Source: TABB Group

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Flash Boys Flash Poll: Impact of latest Lewis book

April 2014

All Press is Good Press

Theres no question that the concepts behind high frequency trading are complex. Creating a narrative that combines the nuances of technology and trading while explaining the evolution of market structure is no easy task, Exhibit 4: especially when shaping it for consumption by Which of the following impacts do you think the a layman audience. Within this complicated book could have on the industry? structure, Lewis has clearly segmented who he believes are the good guys and bad guys. The media blitz around the book will undoubtedly take these definitions to shape public opinion, catch the eyes of regulators and legislators, and demand change. There is a strong belief among the participants that the book will intensify the investigations by New York Attorney General Eric Schneiderman and increase the likelihood of regulatory change from the Securities Source: TABB Group Exchange Commission (SEC). However, others are more sanguine, with nearly one-third saying the book will have its 15 minutes and fade. One glimmer of hope in all is that the book could invite the curiosity of new grads and recruits. Nearly one-quarter believe that just as Jordan Belforts coverage in Forbes increased the demand for jobs at Stratton Oakmont, the bad publicity surrounding HFT will glorify the job. At a time when Silicon Valley becomes increasingly attractive to a younger generation of tech talent, boosting the appeal of Wall Street is all the more important. When we looked into the data by the types of firms responding, we saw an interesting divide. Proprietary trading groups are less likely to believe the book will result in further regulations. Have they become numb to the bashing of their business or is this just wishful thinking? On the other hand, the buy side is more likely to believe SEC regulations and investigations are on their way.

2014 The TABB Group, LLC. All Rights Reserved. May not be reproduced by any means without express permission. |

Flash Boys Flash Poll: Impact of latest Lewis book

April 2014

Exhibit 5 Other than Lewis, who could benefit the most from the surrounding publicity?

Who has the most to lose from the surrounding publicity?

Source: TABB Group

Publicity will also lead to a breakdown of winners and losers. Portrayed as a beacon of change for much of Flash Boys, IEX easily gains bragging rights as the top winner, while HFT firms stand to lose the most (see Exhibit 6: Exhibit 5). While IEX has been widely With a renewed interest on HFT, what other hot shown as the good guy, it is ironic button topic will the media frenzy detract from that they technically fall into the dark most? pool category, a group that stands to be negatively impacted by the ensuing hype. In fact, it is notable that in the 60 Minutes piece, no one bothered to make the distinction between an Exchange and an ATS, or talk about the features within IEX that would make it difficult to achieve exchange status. With the generally negative media coverage of dark pools yet current positive feedback about IEX, it will be interesting to see if this gets reconciled one way or another.
Source: TABB Group

2014 The TABB Group, LLC. All Rights Reserved. May not be reproduced by any means without express permission. |

Flash Boys Flash Poll: Impact of latest Lewis book

April 2014

Diving into the data by firm type (not shown here), we see proprietary trading firms really believe that HFT and Exchange will be most hurt by the book and do not believe it will affect anyone else. We should also note that we had a request from one company to be removed from the Winners list, which we did, and replaced with a blatantly self-promotional choice, TABBForum. On the other hand, we had multiple calls from folks who were disappointed they were not on the list. You cant win.

Speed Dealers: the Movie

Lewis books have a habit of being adapted to the big screen. Think Moneyball (2011), The Blind Side (2009), and The Big Short, which is reportedly in development. To help the producers speed things along, TabbFORUMs community has already done the courtesy of picking out the cast (see Exhibit 7). Of course, not all of the folks below are necessarily prominent characters in the book, and we missed a few obvious targets as well. BTW, This is all done in humor. No offense intended. The only reason we put Peter Griffin in the mix so that Seth MacFarlane could play two parts and dramatically reduce production costs. One interesting divide within the firm types was that proprietary trading groups were far more likely to choose Billy Corgan to play Haim Bodek. We believe this is because HFT firms likely have better taste in music. Meanwhile, Christian Slater, this is a huge favor. We expect an invitation to the premiere.
Exhibit 7 The Cast: Which actors are most likely to play the following characters (our guess as to whether these folks show up in the movie)?

Source: TABB Group

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Flash Boys Flash Poll: Impact of latest Lewis book

April 2014

Once out in theaters, Speed Dealers will be the latest in a long line of films that focus in on Wall Street. Of course, the most recent, Wolf of Wall Street (2013), had a decidedly negative outlook on members within the industry. With a plethora of drugs and profanity (breaking a record in fact using one particular obscenity), the movie did no favors for public opinion. If the theoretical Speed Dealers were to follow the same track, another drop in public opinion would probably be likely.
Exhibit 8: Which other Wall Street-focused film will it imitate the most?

Source: TABB Group

2014 The TABB Group, LLC. All Rights Reserved. May not be reproduced by any means without express permission. |

Flash Boys Flash Poll: Impact of latest Lewis book

April 2014

Confidence Rebounds
For the first time since 2010, confidence in market structure has strengthened! After last years Hash Crash, the rogue AP tweet that caused a momentary sudden drop in the markets, market structure confidence was at its lowest in three years. Shaken by a series of tech glitches and sudden crashes, the industrys outlook was bleak. Thankfully, it looks as though things are looking up, although it would be hard to say that confidence is as strong as it should be.
Exhibit 9: Level of Confidence in US Equity Market Structure, 2010-2014

Source: TABB Group

Unsurprisingly, the markets response for brainstorming a solution to this complex problem was highly fragmented. Many did agree, though, that one of the first steps is greater transparency, more education, and better Exhibit 10: tools for reporting (35%). If Flash Boys does What could be done to increase your confidence help to spur this, it would be a step to greater in equity market structure? confidence. Access to more information and discussion is also another way to earn back the publics trust. Giving a wider audience a glimpse into the modern financial framework can help to clear up the idea that everyone on Wall Street is a villain. After all, sunlight is the best disinfectant.

Source: TABB Group

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Flash Boys Flash Poll: Impact of latest Lewis book

April 2014

About
TABB Group
TABB Group is a financial markets research and strategic advisory firm focused exclusively on capital markets. Founded in 2003 and based on the methodology of first-person knowledge, TABB Group analyzes and quantifies the investing value chain, from the fiduciary, investment manager and broker, to the exchange and custodian. Our goal is to help senior business leaders gain a truer understanding of financial markets issues and trends so they can grow their businesses. TABB Group members are regularly cited in the press and speak at industry conferences. For more information about TABB Group, visit www.tabbgroup.com.

The Author
Valerie Bogard
Valerie Bogard joined TABB Group in October 2012. Previously, she contributed reporting to Newsweek, Working Mother magazine, and Above Live magazine. She attended New York University where she graduated with a Bachelors in Journalism and Political Science. Recently, Valerie has contributed several pieces to TabbFORUM that focus on the regulatory and political aspects of capital markets. She recently co-authored the report Cross-Listing: The Tension of Cooperation.

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Flash Boys Flash Poll: Impact of latest Lewis book

April 2014

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