Review: Dark Pools

By Scott Patterson; Grade: A

When I first accepted this book, I was apprehensive, to say the least. And the reason for that was the fact that my knowledge about the stock market is painfully limited. No exaggeration there. But then, I’m always up for a challenge, and how could I back down from this one? So I studied a little on the internet. Didn’t understand much, but hey, I tried! I decided to start the book based on the little I had understood.

A news-breaking account of the global stock market’s subterranean battles, Dark Pools portrays the rise of the “bots”- artificially intelligent systems that execute trades in milliseconds and use the cover of darkness to out-maneuver the humans who’ve created them.
In the beginning was Josh Levine, an idealistic programming genius who dreamed of wresting control of the market from the big exchanges that, again and again, gave the giant institutions an advantage over the little guy. Levine created a computerized trading hub named Island where small traders swapped stocks, and over time his invention morphed into a global electronic stock market that sent trillions in capital through a vast jungle of fiber-optic cables.
By then, the market that Levine had sought to fix had turned upside down, birthing secretive exchanges called dark pools and a new species of trading machines that could think, and that seemed, ominously, to be slipping the control of their human masters.
Dark Pools is the fascinating story of how global markets have been hijacked by trading robots–many so self-directed that humans can’t predict what they’ll do next.

First of all, to all let me tell you what the term ‘Dark Pools’ means. My friend, the internet, told me- ‘Dark pools’ is the name given to networks that allow traders to buy or sell large orders without running the risk that other traders will work out what is going on and put the price up, or down, to take advantage of the order. Author Scott Patterson says in the book-

“Narrowly defined, a dark pool refers to a trading venue that masks buy and sell of orders from the public market. I argue in this book that the entire United States stock market has become one vast dark pool. Orders are hidden in every part of the market.”

Basically, the book is all about how High Speed Traders [known by that name because they trade in and out of stocks thousands of times per second] have overtaken the stock market. While they do protect investors from the middlemen, their lack of transparency could have serious consequences.

Beginning with the cover; it is dark, true to the title. I liked it, especially the digital hand with its pointed tip. It’s racy and dangerous, but still attractive. Like the stock market itself.

Moving on to the story; Well, being so young, it was really tough to understand the book – seriously tough – but I managed mainly because the author’s writing is superb. Absolutely superb. His way with words is amazing. And given that he’s a journalist, you can’t expect anything less. Also, his familiarity with the subject shows. He’s knowledgeable, and he puts that knowledge forward in the form of a story, compelling the reader to turn the next page.

The author has written another book (The Quants), which is supposed to be a prequel to this one, but Dark Pools can be read as a standalone.

The book is really intriguing, and I’d recommend it, but only if you’re well versed with the nuances of trading, the stock market and all of that. If not, then you may face difficulties in terms of being able to understand the book. I had to work really hard to understand it, which is why I took really long to read it.

In short, the book’s amazing, and so is the author’s writing, but only if you’re in the know-how of the stock market. Go buy it if you think you can comprehend it.