Alec Liu motherboard.vice.com “If you’re on Wall Street, you would just assume that you’re being ripped off, unless you were the one doing the ripping off,” says Dave Lauer, who has helped build robotic systems at top firms like Citadel.
This is the opening of The Wall Street Code, a new documentary on the mysterious and sometimes incomprehensible world of high frequency trading produced by Backlight, a Dutch public broadcasting company. The focus of the documentary isn’t on Lauer, who has testified as an expert at a Senate Committee Hearing on HFT, but on Haim Bodek, a "genius" algorithm architect who dared to break Wall Street’s notorious omerta, the industry’s unwritten rule of silence and secrecy.
Lauer, for instance, refuses to discuss the details of his past work. “I can’t get into that,” he says, breaking a smile. “I’m terrified of Citadel lawyers.”
Lauer left the scene after the 2010 Flash Crash, in which the market dropped 1000 points in minutes, only to bounce back again—an event, he says, that would irrevocably change him.
Known as the Algo Arms Dealer, Bodek reveals not only the ins and outs of how Wall Street traders cash in on the marketplace with an advanced amalgamation of speed and artificial intelligence, but also details of how the market is rigged. Bodek would report his findings to the Securities and Exchange Commission, which, on Wall Street, almost never happens, at least from a well-known insider.
Bodek made his discovery when his own algorithms—he had started his own high frequency trading firm, called Trading Machines—suddenly stopped working one day.
“There’s kind of a rule. Never blame other people. Never blame the market. Never blame the other trader,” Bodek explains. “It’s always you. Your ‘code’ is wrong.”
Despite his well regarded skill for sussing out the answer to such problems, Bodek couldn’t figure it out, and he wouldn’t for twelve months, despite scanning a million lines of code for a possible bug. The answer wouldn’t come from inside his machine. Instead, he found out at a bar, when an exchange insider let him in on a little secret. The game was rigged...
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