Flash Boys: A Wall Street Revolt by Michael Lewis

critical. “One guy says to me, ‘It doesn’t matter if I’m one second slower or one microsecond; either way I come in second place.’ ” The switching times fell from 150 microseconds to 1.2 microseconds per trade. “And then,” says Ronan, “they started to ask, ‘What kind of glass are you using?’ ” All optical fibers were not created equal; some kinds of glass conveyed light signals more efficiently than others. And Ronan thought: Never before in human history have people gone to so much trouble and spent so much money to gain so little speed. “People were measuring the length of their cables to the foot inside the exchanges. People were buying these servers and chucking them out six months later. For microseconds.”
    He didn’t know how much money high-frequency traders were making, but he could guess from how much they were spending. From the end of 2005 to the end of 2008, Radianz alone billed them nearly $80 million—just for setting up their computers near the stock exchange matching engines. And Radianz was hardly the only one billing them. Seeing that the fiber routes between the New Jersey exchanges were often less than ideal, Ronan prodded a company called Hudson Fiber into finding straighter ones. Hudson Fiber was now doing a land-office business digging trenches in places that would give Tony Soprano pause. Ronan could also guess how much money high-frequency traders were making by the trouble they took to conceal how they made it. One HFT firm he set up inside one of the stock exchanges insisted that he wrap their new computer servers in wire gauze—to prevent anyone from seeing their blinking lights or improvements in their hardware. Another HFT firm secured the computer cage nearest the exchange’s matching engine—the computer code that, in effect, was now the stock market. Formerly owned by Toys “R” Us (the computers probably ran the toy store’s website), the cage was emblazoned with store logos. The HFT firm insisted on leaving the Toys “R” Us logos in place so that no one would know they had improved their position, in relation to the matching engine, by several feet. “They were all paranoid,” said Ronan. “But they were right to be. If you know how to pickpocket someone and you were the pickpocketer, you would do the same thing. You’d see someone find a new switch that was three microseconds faster, and in two weeks everyone in the data center would have the same switch.”
    By the end of 2007 Ronan was making hundreds of thousands of dollars a year building systems to make stock market trades faster. He was struck, over and over again, by how little the traders he helped understood of the technology they were using. “They’d say, ‘Aha! I saw it—it’s so fast!’ And I’d say, ‘Look, I’m happy you like our product. But there’s no fucking way you saw anything.’ And they’re like, ‘I saw it!’ And I’m like, ‘It’s three milliseconds—it’s fifty times faster than the blink of an eye.’ ” He was also keenly aware that he had only the faintest idea of the reason for this incredible new lust for speed. He heard a lot of loose talk about “arbitrage,” but what, exactly, was being arbitraged, and why did it need to be done so fast? “I felt like the getaway driver,” he said. “Each time, it was like, ‘Drive faster! Drive faster!’ Then it was like, ‘Get rid of the airbags!’ Then it was, ‘Get rid of the fucking seats!’ Towards the end I’m like, ‘Excuse me, sirs, but what are you doing in the bank?’ ” He had a sense of the technological aptitude of the various players. The two biggest high-frequency trading firms, Citadel and Getco, were easily the smartest. Some of the prop shops were smart, too. The big banks, at least for now, were all slow.
    Beyond that, he didn’t even really know much about his clients. The big banks—Goldman Sachs, Credit Suisse—everyone had heard of. Others—Citadel, Getco—were