Canadian says ‘moral compass’ led him to solve unfair gaming of stock markets by high-frequency traders – by Armina Ligaya (National Post – April 1, 2014)

The National Post is Canada’s second largest national paper.

Even though Canadian trader Brad Katsuyama had found the elusive answers to a question that baffled even the most powerful Wall Street investors, he had a tough time, at first, even getting a meeting in the executive offices of one of the top financial firms in the United States.

The Markham, Ont.-native worked in the Manhattan offices of the Royal Bank of Canada, a bit player in Wall Street eyes, and was armed with a degree from Wilfrid Laurier University, not an ivy-league pedigree school.

But after a few minutes with Mr. Katsuyama, it was clear he had cracked the code of the next frontier of finance: how some high-frequency trading firms game the stock-market system to skim profits in a fraction of the time it would take to blink an eye, and how his software could get around this.

“I think at first, when I walk into the office, I’m not impressing anyone, right?” said Mr. Katsuyama, in a phone interview from New York. “But after five minutes of talking, I think I had their attention. It is kind of nice that it had more to do with what I was saying and not what I looked like.”

Now, the modest Mr. Katsuyama is being heralded as the hero in the new book Flash Boys: a Wall Street Revolt, a look at the controversial high-frequency trading industry, by Michael Lewis, of The Big Short and Moneyball fame.

In the book, released Monday, Mr. Lewis praises Mr. Katsuyama — “a Canadian, of all things” — as the figure at the centre, who gathered a rag-tag team of experts to shine a light on the inner workings of the high-speed financial trading industry.

“His willingness to throw open a window on the American financial world, and to show people what it has become, still takes my breath away,” Mr. Lewis wrote.

Since 2007, the realm where stock trades are made no longer resembles the iconic image of a packed trading floor full of screaming alpha males. Thanks to new technologies, shares change virtual hands via lightning-fast electrical impulses over fiber optic wires stored in bulky servers.

With high-frequency trading, algorithms are used to read market activity and buy and sell securities in fractions of seconds. Some say this brave new financial world may have resulted in benefits for the market, such as greater liquidity and lower costs.

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