[001sky]

There is a 10,000 word excerpt in the NYT. Read it and if you have a specific comment or critique on methodology, come back and update this thread. They may or may not be useful comments. There's enough orthogonal variation in the approaches (in terms of data collection, observed reactions of market participants, and analytic consistentcy) to not dimsiss the narrative as "trivial". But YMMV.

[fr0sty]

So "Because it is on the NYT website" is your answer?

The excerpt from the book is largely the story from a single point of view, I don't see a lot of corroborating quotes, zero footnotes, and the facts are too convenient to the narrative to be the whole of the story.

Pulling one paragraph:

> As it happened, at almost exactly the moment Carlin Financial entered Brad Katsuyama’s life, the U.S. stock market began to behave oddly. Before RBC acquired this supposed state-of-the-art electronic-trading firm, Katsuyama’s computers worked as he expected them to. Suddenly they didn’t. It used to be that when his trading screens showed 10,000 shares of Intel offered at $22 a share, it meant that he could buy 10,000 shares of Intel for $22 a share. He had only to push a button. By the spring of 2007, however, when he pushed the button to complete a trade, the offers would vanish. In his seven years as a trader, he had always been able to look at the screens on his desk and see the stock market. Now the market as it appeared on his screens was an illusion.

His trading problems coincide with changing to a new technology platform and he blames the market and not the new software? Did anyone else experience a severe degredation in their trading performance? Did Lewis even ask anyone else?

[001sky]

NYT isn't the author. Anyway, who would believe and RBC guy? That's why he went to SAC for a quick sanity check.

But as he talked to Wall Street investors, he came to realize that they were dealing with the same problem. He had a good friend who traded stocks at a big-time hedge fund in Stamford, Conn., called SAC Capital, which was famous (and soon to be infamous) for being one step ahead of the U.S. stock market. If anyone was going to know something about the market that Katsuyama didn’t know, he figured, it would be someone there. One spring morning, he took the train up to Stamford and spent the day watching his friend trade. Right away he saw that, even though his friend was using software supplied to him by Goldman Sachs and Morgan Stanley and the other big firms, he was experiencing exactly the same problem as RBC: He would hit a button to buy or sell a stock, and the market would move away from him. “When I see this guy trading, and he was getting screwed — I now see that it isn’t just me. My frustration is the market’s frustration. And I was like, ‘Whoa, this is serious.’ ”

This dispels (according to the story) the notion that it was a firm specific or SW specific issue. Of course you could assume this is fabricated (for convenience). But the next step is harder to fabricate:

He hired Rob Park, a gifted technologist, to explain to him what actually happened inside all these new Wall Street black boxes, and together they set out to assemble a team to investigate the U.S. stock market. Once he had a team in place, Katsuyama persuaded his superiors at RBC to conduct what amounted to a series of experiments. For the next several months, he and his people would trade stocks not to make money but to test theories. RBC agreed to let his team lose up to $10,000 a day to figure out why the market in any given stock vanished the moment RBC tried to trade in it. Katsuyama asked Park to come up with some theories.

This could easily be verified independent of Katsuyama (eg, by talking to either the other principals and/or 3rd parties as RBC management). What is important, however, it it is orthogonal to anecdote. And by putting capital at risk and testing ex-ante theories, not only are they getting on firmer epistemic grounds, but they are leaving paper trails internally and externally.

As they worked through the order types, the Puzzle Masters created a taxonomy of predatory behavior in the stock market. Broadly speaking, it appeared as if there were three activities that led to a vast amount of grotesquely unfair trading.

Of course you could object to this as "fabrication". But there is evidence that they tested SW products to defeat these various strategies. These products were later bought and then spun out and backed by third party customers & investors.

Again, this could all be fabricated. But you would need elaborate conspiracy theories to explain the lack of due dilligence by the investors (not to mention Lewis).