Tuesday, 8 April 2014

Flash Boys' sinister ending: who owns the new evil microwave tower?

At the conclusion of Flash Boys, Lewis holds out a challenge to find who owns the tower with the mysterious FCC license plate number 1215095.

"The application to use the tower to send a microwave signal had been filed in July 2012, and it had been filed by ... well, it isn't possible to keep any of this secret anymore. A day's journey in cyberspace would lead anyone who wished to know it into another incredible but true Wall Street story, of hypocrisy and secrecy and the endless quest by human beings to gain a certain edge in an uncertain world." 
 Part of the last paragraph of Flash Boys

This final piece of the narrative paints this particular microwave New New Thing as the next, somewhat sinister, step in the evolution of speed. Spread Networks was one piece of secretive infrastructure used to help rig the markets. Now it is the turn of evil microwave. Who owns this new form of evil to help the HFT pirates continue to rig the financial markets?

The internet has reacted! A bit of frenzied internet sleuthing has subsequently taken place over a number of blogs, tweets and web sites. A number of parties have reached the same conclusion.

Tradeworx! Mr Narang confirmed it to the WSJ. They're the new bandits!

Sigh... I don't think so. Read on.

I found the ending of Flash Boys one of the saddest bits of the Lewis book. I feel it was sad for journalism, unless you support deceptive journalism.

Mr Lewis goes to great pains to weave a narrative around Spread Networks. I think you'd have to agree it is a key part of the plot. He then throws out the New New Thing of microwave at the conclusion of the book with clear sinister overtones. You could almost hears the Jaws theme in the background. Good people have been hunting down who could it be doing this New New Thing of evil that was the evolution of speed after Spread Networks? A participatory cliff hanger to ferret out the perpetrators was a neat literary device.

Surely it would have been responsible journalism for Lewis, especially when writing on the scale of a book, a Lewis book nonetheless, to “google” the topic so he could have found out that his narrative was wrong and RF microwaves had been used on the Illinois – New Jersey link since 2009, BEFORE spread networks went live.

It took me less than thirty seconds to get a reference to a credible microwave 2009 story. Here's an article I've tweeted previously from the Chicago Tribune from 2012.
"He [Benti] said the microwave network starts at 350 E. Cermak, ends at another telecom hotel at 165 Halsey St. in Newark, N.J., and went live in the fourth quarter of 2009."
Did he ask Spread Networks? Lewis can remember hand movements and idle moments from conversations of meetings with enough clarity to include much minutiae in the book. Maybe Spread Networks didn't know about microwave when Lewis talked to them?

From page two of the Chicago Tribune article,
"Spread Networks CEO David Barksdale dismissed such criticism. Yes, data travels faster through the air than through fiber-optic lines, but severe weather events can disrupt microwave signals, and those signals can't carry as much data at one time as fiber can."
I think they knew.

Is it shoddy journalism from Mr Lewis? Perhaps he didn't want these particular facts to get in the way of his significant plot device. Now, if Lewis had included the microwave links from 2009 in the story, it wouldn't have necessarily changed his message. He should have been more aware and not so inaccurate. If Lewis can't get the basics of his main Flash Boys narrative right, you need to take everything else with a pinch of salt.

Also, why is Tradeworx copping flak for this? This fact of Tradeworx owning microwave was been public for sometime. Wired ran a high profile story in 2012 that even had a big coloured box with the Tradeworx name on it. There was even a price tag! Hardly a complete secret.

From the wired article with Tradeworx hidden in plain sight
In the words of the great Lleyton Hewitt, “Come on!”

There is no news here, just scuttlebutt and harmful innuendo. Lewis is implying Tradeworx is rigging the market. They are not. They're just collateral damage in Lewis' missteps.

How can we trust the story telling if the main plot device is so twisted out of shape?

Ought Lewis have known more about microwave?

Jim Barksdale is the investment force behind Spread Networks. Is he also an investor in IEX? Can't be sure, but his fellow ex-Netscape CEO Jim Clark is on the IEX board. Obviously these guys are acquaintances of Lewis from the New New Thing days. A Barksdale, David, remains CEO of Spread. Lewis could have asked them. Any of them. Based on the Chicago Tribune story, they ought to have known.

Lewis didn't even need his contacts here. He could have clicked "search."

Incompetent or deceptive?

You decide.


An example of the disclosed use of Spread Networks fibre:


Getco use of Spread from their S-4:
"Colocation and data line expenses increased $18.9 million (52.0%) to $55.2 million in 2010 from $36.3 million in 2009 primarily due to the introduction of Spread Networks, which is a fiber optic line that transmits exchange and market data between Chicago and New York, and the build out of GETCO’s Asia-Pacific colocations and data lines."


  1. While I admire a healthy dose of skepticism as I can best tell your criticism of Lewis seems only to be that he suggests that the radio tower is a newer phenomenon than the direct FO link when in fact its not. Hardly a stinging indictment of the book!

  2. If this was all I wrote I'd have to agree with your sentiment John. What I wrote here was simply my reaction to the "internet" buzz around the particular RF ending to the Flash Boys. I believe there was an unhealthy emphasis on RF due to what I found to be a controversial narrative built around the rollout by Lewis' mates Spread Networks fibre bookended by the interesting literary technique Lewis used in leaving the ominous microwave tower hanging. Such emphasis was historically misleading and as it was such a large part of the narrative I found it a controversial and important misdirection that detracted from the honesty of the book. More misleading than incorrect but misleading enough to be unforgivable in my simple mind. I wrote a somewhat more detailed post and commentary on the book earlier here but others, with some referenced at the bottom of that post, have certainly had better articulated and more significant criticisms than myself.

    The essence of my annoyance with Lewis mainly relates to the fact that he presents the NMS in the US as rigged and harmful to investors when it is in a great condition, though far from perfect, in a historical context and that good condition applies to all investors, including Main Street. I interpreted Brad Katsuyama as ethical but naive and I certainly don't see IEX as part of the solution but wish them no harm.