Broken Markets

Sal Arnuk is partner, cofounder, and co-head of equity trading of Themis Trading, LLC, a leading independent agency brokerage firm that trades equities for institutional money managers and hedge funds. Arnuk has extensive experience in equities trading and is an expert in electronic trading and market structure. Prior to founding Themis in 2002, he was with Instinet Corporation, where he headed the team responsible for equity sales and trading for institutional money managers, for more than 10 years. His opinions are sought by leaders, regulators, market partici-pants, and the media and are presented via white papers and Themis’ widely read blog. He is a frequent speaker at industry conferences, such as Trader Forum, Waters, National Organization of Investment Professionals (NOIP), and Fusion IQ’s Big Picture, on issues involving market access, algorithmic trading, and other sell- and buy-side concerns. He also provides expert commentary for media outlets such as the Associated Press, BBC Radio, Bloomberg TV and Radio, BNN, CNBC, Fox Business, NPR, Barron’s, The New York Times, The Wall Street Journal, USA Today, Time, Los Angeles Times, Bloomberg News, Pensions & Investments, and Advanced Trading. Arnuk earned an MBA in finance from New York University’s Stern School of Business and a Bachelor’s degree in finance from SUNY Binghamton University. Joseph Saluzzi is partner, cofounder, and co-head of equity trading of Themis Trading, LLC. Saluzzi has extensive experience in equities trading and is an expert in electronic trading and market structure. Prior to Themis, he headed the team responsible for equity sales and trading for hedge fund accounts at Instinet Corporation for more than 9 years. Saluzzi has provided analysis to regulators, including the Securities and Exchange Commission and as a member of the Commodity Futures Trading Commission’s new Subcommittee on Automated and High Frequency Trading. He has appeared or been quoted on market structure issues by media outlets such as CBS’s 60 Minutes, BBC Radio, Bloomberg Television and Radio, CNBC, Fox Business, BNN, The New York Times, The Wall Street Journal, USA Today, Reuters, Associated Press, Los Angeles Times, and Bloomberg News. Saluzzi also has authored articles for Traders Magazine, Dow Jones, Journal of Investment Compliance, and Journal of Indexes. He earned an MBA in finance from the University of North Caro- lina at Chapel Hill and a Bachelor’s degree in finance from New York University.

The markets have evolved at breakneck speed during the past decade, and change has accelerated dramatically since 2007's disastrous regulatory "reforms." An unrelenting focus on technology, hyper-short-term trading, speed, and volume has eclipsed sanity: markets have been hijacked by high-powered interests at the expense of investors and the entire capital-raising process. A small consortium of players is making billions by skimming and scalping unaware investors -- and, in so doing, they've transformed our markets from the world's envy into a barren wasteland of terror. Since these events began, Themis Trading's Joe Saluzzi and Sal Arnuk have offered an unwavering voice of reasoned dissent. Their small brokerage has stood up against the hijackers in every venue: their daily writings are now followed by investors, regulators, the media, and "Main Street" investors worldwide. Saluzzi and Arnuk don't take prisoners! Now, in Broken Markets, they explain how all this happened, who did it, what it means, and what's coming next. You'll understand the true implications of events ranging from the crash of 1987 to the "Flash Crash" -- and discover what it all means to you and your future. Warning: you will get angry (if you aren't already). But you'll know exactly why you're angry, who you're angry at, and what needs to be done!

Foreword by Former U.S. Senator Ted Kaufman xIntroduction 1Chapter 1: Broken Markets 7Chapter 2: The Curtain Pulled Back on High Frequency Trading 23Chapter 3: Web of Chaos 45Chapter 4: Regulatory Purgatory 67Chapter 5: Regulatory Hangover 83Chapter 6: The Arms Merchants 97Chapter 7: It’s the Data, Stupid 111Chapter 8: Heart of Darkness 125Chapter 9: Dude, Where’s My Order? 141Chapter 10: The Flash Crash 151Chapter 11: The Aftermath 177Chapter 12: Killing the Stock Market That Laid the Golden Eggs 195Chapter 13: Call to Action 217Appendix: Themis Trading Whitepapers 233Index 289