Review: Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market by Scott Patterson

By the end of the twentieth century corruption was widespread among the ranks of Wall Street stock brokers, but there was a powerful force of change on the horizon: technology. In Dark Pools, author Scott Patterson shares the story of how computers would come to upend the old guard of the stock exchanges and transform the markets in fantastic, and often unpredictable, ways.

Wall Street: The place where our 401ks and pension funds go, which we should all probably understand better than we actually do. Despite what could be called, at best, amateur interests in the world of trading, I couldn’t put this book down. While by no means a deep technical work, Dark Pools still proved highly educational, offering a lot of insight into the inner workings of today’s stock market. Fortunately, Patterson presents the material in a way that’s eminently accessible, even for those without a Wall Street Journal subscription. Discovering not just how the market is, but how it came into its current form, was eye opening.

Dark Pools isn’t just about the markets, however. It’s also a testament to the raw power of computing and its ability to change the way we work in just a few years time. I expected the book to cover some hyper-modern trends like high frequency trading. What I didn’t anticipate was a beautiful and inspirational story about a few gifted individuals employing computers to revolutionize the world of finance. As it turns out, one 20-something young man working out of a tiny office near Wall Street actually built large portions of the high tech stock market we see around us today. Ever the idealist, he sought to beat the hordes of greedy and self-serving market makers at their own game, using little more than a closet full of computers and his brain. And in many ways, he succeeded. But the story doesn’t end there; this new technology would eventually take on a life of its own, growing and evolving at fantastic pace. Millions and billions would be made and lost in seconds. And it’s still going on, all around us. Some say it’s out of control.

I thoroughly recommend Dark Pools to anyone with even a passing interest in the stock market or the development of technology. It’s an eye-opener on the state of our national finances on one hand, and a testament to the power of man and machine on the other.

Rating: 5/5

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