Quarter One Reflection

  1. What have you learned about reading? What have you learned about writing analysis & argument?  How has your approach to reading & writing changed overall? I have learned to be more critical about the structure of what is written, as well as use that structure to base the structure of my response on. Also, I’ve learned a lot about writing thesis statements and how to structure my writing.
  2. What questions do you still have? I want to know how I can improve and how my essays look compared to the higher scoring essays from the AP exam. I am still pretty confused about some of the vocabulary that is used in the essays and the vocabulary used to describe the writing.
  3. With what types of reading & writing would you like more practice? Analyzing the rhetoric choices made by authors and coming up with an entire essay off of one word being used instead of another is still crazy to me, and I’d like to understand and improve my analytical writing more.
  4. Based on 1-3, what are 2-3 goals you have to make improvement moving forward? I want to score more in the 7-8 range, instead of the 6-7 range I am in now. I need to work on word choice also.
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Chapter Five, pages 128-150

  • Chapter five goes more in depth about the life of Sergey Alenynikov and how Wall Street affected him, his personal experience, and high frequency trading as well as HFT firms. This chapter also explains more about the inner workings of Goldman Sachs,
  • “What he’d done, in his view, was trivial; what he stood accused of- violating both the Economic Espionage Act and the National Stolen Property Act- did not sound trivial at all. Still, he thought that if the agent understood how computers and the high-frequeency trading business actually worked, he’d apologize and drop the case.”
  • This chapter goes more in depth about Alenynikov’s personal life than I had found in the article I read before. However, a lot of the phrases are exactly the same as the article and disappointingly enough, don’t go into more detail. Because I understand HFT more than I did when I read the article previously, I understand the situation with Alenynikov more. I believe that legally( although I do not claim to have an extensive legal knowledge ) Alenynikov was mistreated. His computers were searched without a warrant and he wasn’t read his Miranda rights until right before he was interrogated. I find it interesting that at the beginning of the chapter, Alenynikov was introduced as being very patriotic to Russia, and only moved to America so he could study computer programming. When he applied to switch his major from mathematics to computer science, authorities didn’t allow it. I find it ironic the authorities didn’t allow him to study programming in Russia, and in America, he ended up sentenced to eight years in federal prison without the possibility of parole. Also I think that he wasn’t all gung ho to go to America is also interesting, because of what a huge impact America had on him eventually. I think the confusion between Alenynikov and the authorities is also interesting to think about because I wonder how the situation would’ve ended up if there wasn’t that confusion. Also, I think that this chapter parallels what I have found previously about the ethical and moral values, and the naivety of people inside the business. I also have brought up previously about handling the wrongdoings of people high up on the Wall Street food chain being problematic. Goldman Sachs found in nessecary to involve the FBI in Alenynikov’s arrest, and I wonder how that relates to punishing other people in Wall Street. I think that there is the possibility that his arrest, being the only Goldman Sachs arrested by the FBI in the aftermath of a financial crisis, was more for show than practicality.

Chapter 4 pg 89-127, and Money Culture by Michael Lewis

  • This chapter focuses mainly on how it was legal for a handful of insiders to operate at faster speeds than the rest of the market and in effect steal from investors, how that corruption had come about, more about HFT(high frequency trading) and the role RBC played. Money Culture paints a portrait of the 1980s financial scene, and I focused on the parts about the 1987 crash, which was also mentioned in Flash Boys.
  • Money Culture; Page 100,”Pointing to the crash of October 1987, the SIA warns that,”the securities markets are extremely sensitive to regulatory and legislative developments, including unofficial remarks by policy makers”
  • Flash Boys; Page 113-114,”By the middle of 2011, roughly 30 percent of all stock market trades occurred off the public exchanges, most of them in dark pools. The appeal of these dark pools…was that investors could expose their big stock market orders without fear that those orders would be exploited”
  • Focusing first on Flash Boys and how the corruption worked, John Schwall found out about the Regulation National Market System ( Reg NMS ), which required brokers to find the best market prices for the investors they represented.The new law required a mechanism for taking the measure of the entire market, the Securities Information Processor (SIP )The thirteen stock markets piped their prices into the SIP and the SIP calculated the National Best Bid and Offer (NBBO) If everyone on Wall Street abided by the Reg NMS, the rule would have established a new fairness in the US stock market. However, the rule contained the loophole that it failed to specify the speed of the SIP. The technology was improved by the high frequency traders setting up computers inside the exchanges, and taking advantage of the cap in time between the public SIP and the private ones as well as how much the stock price moved around. I would argue that this is majorly a part of the main focus of the book, how the stock market has changed and become corrupted. I am interested to learn about what, if anything, has been done or is planned to be done about exposing the stock market and possibly correcting it. I think with the connections and wealth of the major players in the corruption, punishing them legally and possibly politically, could be very hard and I can’t think of many people who would be interested in doing so. I think it’s really interesting how oblivious the “have nots” are and how much people lost from the corruption. Schwall talks about how,”people set out this way to make money from everyones else’s retirement account. I knew who was being screwed, people like my mom and pop.” This goes way back to one of my earliest posts where I talked about my interest in the topic is partly because the effects on the average people. Underneath all the jargon and acronyms and Wall Street gibberish, thats what this book is all about, the change in the stock market which caused so many lives to be ruined. In Flash Boys it is talked about how the 1987 stock market crash, gave rise to the first form of high frequency trading. Money Culture talks specifically about the 80s, and Lewis talks about everything from personalities to the U.S culture to Britian’s culture to the RJR Nabisco takeover. I think that Money Culture shares a lot of parallels and common themes with Flash Boys, such as the effects of personality, and the corruption. I am planning on reading Money Culture in more depth and subsequently gain a greater understanding. The 1987 crash is mentioned in both books, and I am planning on finding more outside sources about that crash, because I believe that it was a key turning point in the history of the stock market.

Chapter Three, page 56-87

  • Chapter Three followed Ronan Ryan in his journey of moving from Ireland to America, and eventually working his way into Wall Street as well following Ryan as his personal understanding of high frequency trading and the changing Wall Street developed.
  • “The U.S stock market was now a class system, rooted in speed, of haves and have-nots…the have-nots never saw the market at all. What had once been the world’s most public, most democratic, financial market had become, in spirit, something more like a private viewing of a stolen work of art”
  • I think the comparison made of a private viewing of art to Wall Street is especially powerful, because it, yet again, shows the changing of the stock market. However, the changing of the stock market effects everyone, which is one thing that is not mentioned by Lewis. It is mentioned how it affects the people working for the stock market. However, the stock market is directly connected to the economy, which effects everyone. I would like to better understand the effects of the stock market on the average people. It was explained in more detail about the routers and that they decide how to slice up an order, and they also determine where the order is sent; completely separate from human control. And again, very few people understand how they work, which is definitely a recurring theme. Katsuyma hires Ryan to work for him, and by the end of the chapter Ryan says that he feels like an expert in something that badly needs to be changed and if himself and Katsuyma don’t do anything, theres no one who will” This is interesting because it shows the effect that Katsuyma and Ryan have. I think that they will eventually change Wall Street by exposing the dishonesty, and show the world what wall street has become. I am curious as to how everyone else in Wall Street sees them, because I get the feeling that they are alone in what they’re doing. The haves would most likely hate them and the have-nots would most likely love them. I do find myself struggling somewhat with understanding the economic terms and wall street lingo, and I am hopeful that my understanding will progress as this project progresses.

Chapter Two, Page 23-55

  • This chapter compared and contrasted how the Royal Bank of Canada(RBC) and the stock market in the U.S functioned, and Brad Katsuyama’s story, as he explored electronic trading as well as the changes in how the stock market works and the effects of those changes. Katsuyama also exploited the corruption, in hopes of establishing RBC as “the only broker on Wall Street not conspiring to screw investors”
  • “What people saw when they looked at the U.S stock market-the numbers on the screens of the professional traders, the ticker tape running across the bottom of the CNBC screen- was an illusion. “That’s when I realized the markets are rigged. And I knew it had to do with the technology. That the answer lay beneath the surface of the technology.”
  • The issue explored in greater depth this chapter was the change in how the stock marker works. Katsuyama had problems with as well all of the RBC stock market traders who worked for them. Their problem was being unable to judge market risks. For everyone, as soon as they bought any shares, the offerings to buy the stock would disappear and the share price would instantly move. Katsuyama’s picture of the market changed, similarly to the idea presented in the Introduction that the world clings to its old mental picture of the stock market because its comforting. The stock market was becoming more and more controlled by computers, and the people controlling the computers, half the time they didn’t understand how the computers work. It is presented in the book the idea that replacing people with machines enabled the markets to not only become faster but also become more complicated. I think that this concept is extremely important because of the implications of a more complicated system. A more complicated system would lead to less people understanding it, such as the people controlling the computers not understanding it, and it was mentioned that when Katsuyama explained certain concepts to professional investors, their eyes would glaze over and Katsuyama would eventually skip it altogether. This says a lot about the understanding of professionals and people in the business, which was a concept discussed in the earlier blog posts. Again, I think that all this points to the idea that corruption is higher up than we originally think. Also, the issue with the prices of the stock changing when an order placed was an issue with the time it took for those signals to go back and forth- milliseconds, fractions of the time it takes you to blink your eye- was costing traders overall $160 million a day. The money cost overall was so small it was hard to notice or measure. Which is important because it shows how clever the people who changed the market structure are. The people at fault for this was never discussed, and I would be very interested in learning who, and why, did this. This goes back to the line that was laid and discussed in chapter one, that cut down the time it took for the signals to go back and forth. Katsuyama and the RBC took a different approach, with “Thor”, which delayed the time it took for the signals to go back and forth, but very precisely delayed the signals. Therefore, the time it takes the signals to go back and forth equal for every exchange. One thing to be noted here is that Katsuyama and the RBC could have very easily made money off of their understanding of the new market structure, but chose not to in hopes of validating themselves for investors.