Flash Boys hero that rivals don’t want on stock market

HE MAY be the hero of one of the most recent famous books about the murky world of stock trading, but Brad Katsuyama and his firm The Investors’ Exchange don’t seem to have many fans on the US stock market.

The book Flash Boys by Michael Lewis detailed the endeavours of Katsuyama and his colleagues who tried to get to stop the tricks of so-called highfrequency traders.

They found that these flash traders were gaining an edge on normal investors by using high tech ways of placing their orders on the stock exchange before anyone else.

But now The Investors Exchange is applying for full stock market status, which would effectively put it alongside the New York Stock Exchange and Nasdaq as a full stock exchange.

The application though has attracted a deluge of attention.

Some 350 letters have been sent to the US Securities and Exchange Commission – which makes the final decision on the application – since the tender was opened up to public comment.

Flash-trading has been notoriously controversial. It is thought to have caused several major flash crashes – where the stock market plummets for a few moments and then rebounds as though nothing happened.

Katsuyama set up The Investors’ Exchange in 2012 as a place where investors could buy and sell stocks without being affected by high-frequency traders.

The firm uses a so-called ‘speed bump’ to slow down all of the trading orders which are sent in by 350 millionths of a second, so they arrive at the same time.

It has sparked an outcry from traders who insist flash trading doesn’t affect ordinary investors.

Hedge fund firm Citadel has written three letters to the US regulator.

In one, its managing director John Nagel said: ‘We feel strongly that the model as proposed does not serve the best interest of investors, is not appropriate for a public exchange and would create fundamental issues that could ultimately threaten the quality of our equity markets.’

Usually the public has 45 days to comment on an application but this has now been extended to March 31 for IEX.

Many have been supportive of IEX’s application.

One stock market trader said: ‘Please make IEX an exchange. It’s a step in the right direction to bring fairness back to the markets.’

But others have been critical of the move.