Dances with Wolves

In a previous post I talked about a new French TV documentary on HFT in which I was involved. The movie was broadcasted on April 29th, 2015, on Canal+, and has attracted much attention since then, but not really in the way I hoped. Here “involved” means: I was contacted by the journalists in May 2014, I told them I would agree to appear in the movie ↔ the idea behind the documentary was to give a fair and neutral outlook of the new electronic market microstructure to the French audience. This is what this movie should have been about. I spent a lot of time to discuss with the main journalist, as I spent time to convince other (and reluctant) people to be in too. A lot of people from the HFT industry (whatever the definition of “high-frequency trading”) are really hesitant to talk about what they are doing, as most of the TV reports are clearly unbalanced. Now I understand why people don’t want to talk anymore.

Beyond speed and the HFT debates (and there is much to debate), the documentary was supposed to make explicit the new and complex reality of the markets with the help of different participants having contradictory positions;  unfortunately, it fails. That doesn’t mean the documentary is not good per se – it’s a good TV product, properly produced, well edited and quite long (90 minutes). But given those 90 minutes, the journalists had time to confront views, to enter more into the detail, to give the (electronic) floor to different voices but they barely did it. Ultimately, the title of the movie, The New Wolves of Wall Street, sets the tone: the new electronic traders are carnivores trying to eat each-other in a battle where speed (and only speed) matters. And ultimately, I am quite blasé.

Yet the journalists had a good cast: ex-Citadel and now KOR Dave Lauer, whistleblower Haim Bodek, the tireless Eric Hunsader from Nanex, old veteran Thomas Petterfy, etc.; add a nice French mathematician Mathieu Rosenbaum, the CEO of a microwave network provider (Stéphane Tyc from McKay Brothers),  IEX’s Brad Katsuyama, IMC’s Remco Lenterman, Mani Mahjouri from Tradeworx, a guy from the French Autorité des Marchés financiers, Benoît Lallemand from Finance Watch, many other folks and a French and detached anthropologist presented as “one of the best experts on HFT in Europe” (that’s not true: they should have said “in the world”, or “in the universe” – I’m just kidding, I don’t like superlatives). With such a cast the journalists should have made a very balanced movie, but in fact they choose to follow the Flash Boys scenario: the very first sequence of the movie is an interview Michael Lewis gave last year when the book was released, so the first words we hear is about the fact “the market is rigged”; then, it’s like is the movie is trying to prove that the market is rigged “and we’ll explain you why it’s rigged” (my words). Not a good start (I should add that the person we see on screen most often is one of the journalists himself, and for once I do agree with one of the comments I read on Twitter: it is quite painful – an ego-trip).

I won’t narrate the whole documentary – it’ll probably be broadcasted in English one day or another. In short, let’s say that the French audience probably learnt a lot of things: about the flash boys’ experience, about the Spread Network cable (never named), about the new places of the exchanges (the data centres), about the microwave network (of course, given my recent love affair with dishes I liked the part when some military guys are installing antennas in North of France, good stuff!), about the quote stuffing, the 7,000 messages sent in a blink of an eye, the Flash Crash (presented as the worst crash in the history of markets – untrue), the former human trader now outmoded, the old tablets of Thomas Petterfy, and so on. But if you want a fair viewpoint and some good reflections about high-frequency trading, this documentary is not for you. Think that you’ll have to wait for the last ten minutes to hear about the fact the human markets were perhaps more rigged before the advent of algorithms, and that, without HFTs, there is no market anymore now (and I don’t develop). After these last ten minutes, the last words of the documentary is about the fact  Flash Boys is going to become an Hollywood movie, so “the new wolves of Wall Street won’t be able to hide anymore” (?!).

I would have more to say but I decided not to spend too much time on this review. Beyond inaccuracies, beyond the biased approach, and beyond some interesting points of view, I regret that there is no historical perspective, and no neutral overall perspective on HFT. Well, it’s TV, and I don’t even talk about the press reviews of the movie – most of them are awful, don’t read them if you don’t want to lose faith in journalism, I’m sure a lot of French people are scared by algorithms and robots now! That said, just an amazing one: on Boursorama, we can read that the “HFT revolution may have dramatic consequences”; why not, but Boursorama (owned by Société Générale) is an online broker like Ameritrade, and guess where the retail orders are sent for execution, via payment for order flow? To KCG, where the orders probably meet a lot of wolves. Anyway. Even if most of the people I convinced to appear in the movie don’t have to worry about the fact their words may have been “misrepresented” (it’s not the case), my overall impression is the movie doesn’t give a fair point of view on electronic trading and my point of view seems to be shared by other participants. That’s probably the difference between books and TV – most of the time TV entertains, but good books educate.

Three last comments. 1) Two participants told me that they would have refused to be in the movie if a third person were in it too (their choice); when they got the list of the participants, this person was not on it but what a surprise, he is in the documentary. So the journalists lied. 2) In the middle of a night I received this email: “Rot it hell”. What? “Not you Alexandre” – OK – “I’m referring to the rat bastard filmakers who were SPECIFICALLY told not to shoot…)”. Fucking children with a camera. You have violated your word. What a disgrace”. The journalists edited something they were not supposed too. Second lie. That’s amazing to see that the ones who shout out that markets need more ethics are so unethical. 3) I wouldn’t have seen it without a comment by a journalist, but in the final credit titles there is a part “Book”, and the only reference here is Michael Lewis’s Flash Boys, no mention of my book. I have zero ego as a writer, but the book I accidentally wrote on the new high-frequency market structure highlighted for the first time, at least in French, many issues Lewis tried to deal with one year after I published my own book (oh, by the way, the journalist is also a writer). As the movie is a French production, and given that I kindly gave a copy of my book to the journalists when they started to work last year, they could have write a line about my little book in the credit titles – that would have been cool for my business as the rights of the book fund other books, I don’t take the money. I assume the fact they “forgot” to quote my book is probably a way to say “Thank you for your help”. “Rot it hell.”

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