The Virtue of Monopoly

Why the Stock Market Stopped Working

Brendan McDermid / Reuters

You’ve heard the story many times. The stock market is rigged. A highly secretive group of opaque financial institutions is making billions of dollars from socially useless high-frequency trading—placing and withdrawing stock orders hundreds of thousands of times per second—with all those profits coming, in one way or another, from the rest of us. The biggest losers of all? Small, mom-and-pop, or retail, investors, who cannot hope to compete. Perhaps the best-known proponent of this narrative is the author and financial journalist Michael Lewis. In his 2014 book, Flash Boys, Lewis painted the stock market as a battle in which the good guys were losing to the bad guys. The book sold well and even instigated a handful of criminal investigations into high-frequency traders (HFTs), none of which bore any visible fruit. For the truth is that even with the rise of high-frequency trading since the early years of this century, actual mom-and-pop investors have never had it so good. Armed with online accounts offering trades for minuscule fees, they see …