Scott Patterson (author)

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Scott Patterson
Born (1969-12-29) December 29, 1969 (age 53)
Occupation(s)Journalist, author

Scott Patterson (born December 29, 1969) [1] is an American financial journalist and bestselling author. [2] [3] He is a staff reporter at The Wall Street Journal and author of Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System and The New York Times bestselling book The Quants . [4] [5] [6]

Contents

Journalism

Patterson has as Master of Arts and English degree from James Madison University. [7] [8] Patterson is a staff reporter at The Wall Street Journal covering government regulation of the financial industry. [8] His coverage has included high-profile interviews with Mark Cuban, Warren Buffett, Edward Thorp and others. [9] [10] [11]

He has been described as the "go-to guy" for high-tech journalism, covering topics such as dark pools, flash crashes, algorithmic trading and high-frequency trading (HFT). [3] [12] [13] [14] [15]

Patterson is an active critic of high-frequency trading, citing HFT as a major cause of market volatility and preferential treatment of select firms, yet acknowledging HFT role as market makers. [16] He is a proponent of greater government oversight on the markets, pointing out that they cannot keep up with Wall Street innovation. He names this as a cause of decreased public confidence in the markets. [17] [18] Patterson attributes the Flash Crash to a combination of all these issues. [13]

Books

The Quants

In 2010, Patterson wrote The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, a bestseller that was published by Crown Publishing. [19] The book outlines computer-driven quantitative trading by following the lives of four "quants." These quants are highly educated whiz kids that created complex mathematical algorithms to exploit market inefficiencies. [6]

Ultimately, the reliance on computer-driven trading was attributed to meltdowns such as Black Monday, the collapse of Long-Term Capital Management, and Great Credit Crackup. [20] The history of quantitative trading is covered, including early quants such as Edward Thorp and how much of the early knowledge was applied from lessons learned at blackjack tables. [21] The book also highlights interactions with people against quantitative trading including Nassim Nicholas Taleb, author of Black Swan . [22]

Dark Pools

On June 12, 2012, Patterson released Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System. [16] [23] [24] [25] [26] The book expands on The Quants to show how the rise of algorithmic trading, artificial intelligence bots, and high-frequency trading have rigged the current stock market. [13] [27] Patterson also discusses how governmental agencies, like the SEC, cannot keep up with the rapid evolution of technology. [17]

These new innovations show no sign of slowing, and Patterson describes AI Bots, Dark Pools, and HFT as the future of trading. [28]

The Globe and Mail described Dark Pools as "the best book going on the issue." [16]

Reception

Patterson's debut book The Quants went on to become a New York Times Bestseller. [5] Due to the success of the first book, Patterson began working on Dark Pools to expand on the issues covered in The Quants. [7]

Patterson's style of writing has been compared to author Michael Lewis, due to his ability to relay complex financial topics in a way suitable for mass appeal. [2] [23] [24] His journalism has been praised for its depth, particularly in cataloging the roots of current market technologies. [29] Patterson's work has been featured in The Wall Street Journal , New York Times , CNBC, Forbes , CNN, Fortune magazine, Rolling Stone , Scientific American , and the Financial Times , among others. [2] [4] [19] [20] [21] [27] [30]

Related Research Articles

<span class="mw-page-title-main">Financial engineering</span> Application of mathematical and computational practices in finance

Financial engineering is a multidisciplinary field involving financial theory, methods of engineering, tools of mathematics and the practice of programming. It has also been defined as the application of technical methods, especially from mathematical finance and computational finance, in the practice of finance.

Algorithmic trading is a method of executing orders using automated pre-programmed trading instructions accounting for variables such as time, price, and volume. This type of trading attempts to leverage the speed and computational resources of computers relative to human traders. In the twenty-first century, algorithmic trading has been gaining traction with both retail and institutional traders. A study in 2019 showed that around 92% of trading in the Forex market was performed by trading algorithms rather than humans.

<span class="mw-page-title-main">Dark pool</span> Institutional share trading syndicate not accessible to general public

In finance, a dark pool is a private forum for trading securities, derivatives, and other financial instruments. Liquidity on these markets is called dark pool liquidity. The bulk of dark pool trades represent large trades by financial institutions that are offered away from public exchanges like the New York Stock Exchange and the NASDAQ, so that such trades remain confidential and outside the purview of the general investing public. The fragmentation of electronic trading platforms has allowed dark pools to be created, and they are normally accessed through crossing networks or directly among market participants via private contractual arrangements. Generally, dark pools are not available to the public, but in some cases, they may be accessed indirectly by retail investors and traders via retail brokers.

SuperMontage, abbreviated simply as SM, is an integrated trading system used in American stock exchange Nasdaq that was implemented in 2002. It features a fully integrated public limit order book and market maker quotations, the ability to enter multiple quotes, anonymous ordering, five-level-deep buy and sell interest, and time-stamps on individual orders.

Tower Research Capital LLC, or simply Tower Research, is a high-frequency trading, algorithmic trading, and financial services fund.

High-frequency trading (HFT) is a type of algorithmic trading in finance characterized by high speeds, high turnover rates, and high order-to-trade ratios that leverages high-frequency financial data and electronic trading tools. While there is no single definition of HFT, among its key attributes are highly sophisticated algorithms, co-location, and very short-term investment horizons in trading securities. HFT uses proprietary trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second.

Hull Trading Company was an independent algorithmic trading firm and electronic market maker headquartered in Chicago. Known for its quantitative and technology-based trading strategy, it was acquired by Goldman Sachs in 1999.

Island ECN was one of the first electronic communication networks established for the trading equities in the United States. Founded in 1996 by Datek Securities veterans Jeff Citron and Joshua Levine, Island executed its first trades in 1997.

<i>The Quants</i> 2010 book by Scott Patterson

The Quants is the debut New York Times best selling book by Wall Street journalist Scott Patterson. It was released on February 2, 2010 by Crown Business. The book describes the world of quantitative analysis and the various hedge funds that use the technique. Two years later, Patterson published a follow-up book, Dark Pools: High Speed Traders, AI Bandits and the Threat to the Global Financial System, an investigative journey into the history of high-frequency trading and the spread of artificial intelligence in today’s markets.

Tradebot Systems, Inc. is a high-frequency equity trading firm in the US. Based in Kansas City, Missouri, they regularly account for 5% of the total trading volume in the US stock market. According to the founder, Dave Cummings, as of 2008, the firm "typically held stocks for 11 seconds", and "had not had a losing day in 4 years". That streak continued uninterrupted until 2017.

<span class="mw-page-title-main">Global Electronic Trading Company</span> American algorithmic trading firm

The Global Electronic Trading Company (GETCO), or Getco LLC, is an American proprietary algorithmic trading and electronic market making firm based in Chicago, Illinois. In December 2012, the firm agreed to acquire Knight Capital Group; this merger was completed in July 2013, forming the new company KCG Holdings.

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Virtu Financial is an American company that provides financial services, trading products and market making services. Virtu provides product suite including offerings in execution, liquidity sourcing, analytics and broker-neutral, multi-dealer platforms in workflow technology and two-sided quotations and trades in equities, commodities, currencies, options, fixed income, and other securities on over 230 exchanges, markets, and dark pools. Virtu uses proprietary technology to trade large volumes of securities. The company went public on the Nasdaq in 2015.

Nanex is a Chicago-based firm that offers streaming market data services, and real-time analysis and visualization tools. They offer data on all market transactions to their clients who are typically traders and other financial analysis firms. "The company can analyse millions of trades per second."

<i>Flash Boys</i> 2014 book by Michael Lewis

Flash Boys: A Wall Street Revolt is a book by the American writer Michael Lewis, published by W. W. Norton & Company on March 31, 2014. The book is a non-fiction investigation into the phenomenon of high-frequency trading (HFT) in the US financial market, with the author interviewing and collecting the experiences of several individuals working on Wall Street. Lewis concludes that HFT is used as a method to front run orders placed by investors. He goes further to suggest that broad technological changes and unethical trading practices have transformed the U.S. stock market from "the world's most public, most democratic, financial market" into a "rigged" market.

<span class="mw-page-title-main">IEX</span> U.S.-based stock exchange

Investors Exchange (IEX) is a stock exchange in the United States. It was founded in 2012 in order to mitigate the effects of high-frequency trading. IEX was launched as a national securities exchange in September 2016. On October 24, 2017, it received regulatory approval from the U.S. Securities and Exchange Commission (SEC) to list companies. IEX listed its first public company, Interactive Brokers, on October 5, 2018. The exchange said that companies would be able to list for free for the first five years, before a flat annual rate of $50,000. On September 23, 2019, it announced it was leaving its listing business.

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<span class="mw-page-title-main">Quote stuffing</span> Form of market manipulation

In finance, quote stuffing refers to a form of market manipulation employed by high-frequency traders (HFT) that involves quickly entering and withdrawing a large number of orders in an attempt to flood the market. This can create confusion in the market and trading opportunities for high-speed algorithmic traders. The term is relatively new to the financial market lexicon and was coined by Nanex in studies on HFT behavior during the 2010 Flash Crash.

<span class="mw-page-title-main">Hudson River Trading</span> Quantitative trading firm based in NYC

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Spoofing is a disruptive algorithmic trading activity employed by traders to outpace other market participants and to manipulate markets. Spoofers feign interest in trading futures, stocks and other products in financial markets creating an illusion of the demand and supply of the traded asset. In an order driven market, spoofers post a relatively large number of limit orders on one side of the limit order book to make other market participants believe that there is pressure to sell or to buy the asset.

Haim Bodek is an American developer of trading software. He worked for Hull Trading Company which was acquired by Goldman Sachs in 1999. He became the global head of Electronic Volatility Trading at UBS by 2006, and later established his own company, Trading Machines, in 2007.

References

  1. ↑ "Scott Patterson". Gale Literature: Contemporary Authors (Collection). Gale. 2011. ISBN   9780787639952 . Retrieved 17 November 2022.
  2. 1 2 3 Cendrowski, Scott (June 22, 2012). "Reasons to fear Wall Street's high-tech traders". CNN Money. Archived from the original on June 25, 2012.
  3. 1 2 Coyne, Shawn (June 1, 2012). "The 500 Dark Pools". Steven Pressfield Online.
  4. 1 2 Hurt, Harry. "In Practice, Stock Formulas Weren't Perfect". New York Times.
  5. 1 2 "Hardcover Business Best Sellers". New York Times. March 5, 2010.
  6. 1 2 Pressley, James (February 18, 2010). "How Quants Made a Killing—and Made a Mess". BusinessWeek. Archived from the original on April 24, 2010.
  7. 1 2 Ritholtz, Barry (December 8, 2010). "A Conversation with Scott Patterson, The Quants". Ritholtz.
  8. 1 2 "Author Bio: Scott Patterson". Amazon.
  9. ↑ Patterson, Scott (June 26, 2012). "Mark Cuban: High-Frequency Traders Are the Ultimate Hackers". Wall Street Journal.
  10. ↑ Patterson, Scott (December 14, 2009). "In Year of Investing Dangerously, Buffett Looked 'Into the Abyss'". The Wall Street Journal.
  11. ↑ "'The Quants': It Pays To Know Your Wall Street Math". NPR. February 1, 2010.
  12. ↑ Patterson, Scott (June 27, 2012). "High-Frequency Trading Has Made Markets More Efficient — Larry Tabb". Wall Street Journal.
  13. 1 2 3 Patterson, Scott (June 10, 2012). "Breakdown: A Glimpse Inside the 'Flash Crash'". Wall Street Journal.
  14. ↑ Patterson, Scott (April 9, 2012). "Trading Mysteries Extend Deeper Than Dark Pools". Wall Street Journal.
  15. ↑ Patterson, Scott (June 13, 2012). "Q & A: The Volcker Rule". Wall Street Journal.
  16. 1 2 3 Erman, Boyd (July 9, 2012). "A critic sees some good in the high-frequency trader". Globe and Mail.
  17. 1 2 Falkenstein, Eric (June 20, 2012). "DARK POOLS: Despite The Scary Title, This Is A Good History Of High Speed Trading". BusinessInsider.
  18. ↑ "Scott Patterson AMA". Reddit. July 6, 2012.
  19. 1 2 Patterson, Scott (January 22, 2010). "The Minds Behind the Meltdown". Wall Street Journal.
  20. 1 2 Patterson, Scott (September 22, 2011). "How Math Whizzes Helped Sink the Economy". Scientific American.
  21. 1 2 Patterson, Scott (February 11, 2010). "Wall St maths geniuses whose models did not add up". Financial Times.
  22. ↑ Task, Aaron (February 11, 2010). "Rise of the Machines: How "Quant" Trading Triggered the Credit Crisis". Yahoo! Finance.
  23. 1 2 Brown, Aaron (June 26, 2012). ""Dark Pools": An Exciting Thriller That Will Teach You About Trading". Minyanville.
  24. 1 2 Carter, Jeff (July 9, 2012). "Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System". Points and Figures.
  25. ↑ "Jon Stewart Interviews 'The Quants' Author: Did Physicists Bring Down Wall Street?". Huffington Post. May 5, 2010.
  26. ↑ Stewart, Jon (March 4, 2010). "Scott Patterson". The Daily Show.
  27. 1 2 "High Speed Threats to Global Financial Systems". CNBC. June 12, 2012.
  28. ↑ "Taking The Market Out Of The Market". SeekingAlpha. June 22, 2012.
  29. ↑ Covel, Michael (June 21, 2012). "Scott Patterson — Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System". Michael Covel.
  30. ↑ Leinweber, David (July 11, 2012). "The Algorithmic Monsters Threatening The Global Financial System". Forbes.
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