21. In an invited editorial appearing in The Journal of Portfolio Management, the founder of Vanguard, John Bogle, made the following two statements about Michael Lewis’s book Flash Boys.

a. Explain whether you agree or disagree with the following statement.

Flash Boys, by best-selling author Michael Lewis, regaled the financial community with its polemic on the rise of HFT. “The stock market is rigged,” Lewis told the huge television audience watching 60 Minutes, without explaining precisely what that meant. “Wall Street has gone insane,” he intoned to the Guardian, which described his view that his calling is “a moral crusade.” But he seems to have largely ignored the vital role of HFT in reducing the frictional costs of trading to minuscule levels.

Lewis is particularly strident on the harm HFT does to ordinary individual investors. But it is here that he seems most clearly wrong. Yes, he sees lots of smoke in HFT, but finds the most fire is where that smoke is virtually absent. Retail investors who trade for themselves are beneficiaries of the new trading environment, with lower trading costs and faster market access.21

b. What are the “well-founded concerns” that Mr. Bogle refers to in the following statement?

HFT is a long way from perfection. There are well-founded concerns—and heated arguments pro and con—about front-running by insiders (based largely on knowledge of pending transactions); huge volumes of cancelled orders (from HFT firms, as well as others); those mysterious dark pools; and outlandish profits earned by HFT firms.