i told brad katsuyama's story.eople don't seem to grasp, i interviewed dozens of high-frequency traders and people at exchanges and in the banks. i am telling the story through the eyes of these characters trying to figure out how the market works. they are teaching the reader in their own journey. i am not ignorant of all the other points of view. there is a passage in the book that lays out what high-frequency traders would say in their defense. there is not much to say. >> what do they say? >> everything we do is in the bounds of the law. we add liquidity to the market. when they say liquidity, you should run for the exits. what does it mean? they add volume to the market. so does a front-runner. we narrow spreads between the, so they used to be much bigger, now they are smaller. it is deceptive because what really announces the spreads is the technology that allows them to narrow and the market is an illusion. you go to act and the market moves. so it is not like i don't know all of the other side of the story,

brad katsuyama is in the book. were going to be in the book when michael lewis first came to you? >> i knew i was going to be part of the book. i think when he decided to go to canada and meet my parents and friends, i realized i was going to be a larger part of the book. >> here is one of the great distinctions. this goes back to your tenure at salomon brothers. from "the new york times," "mr. lewis seemingly glosses over the -- the bighats exchanges which are enabling and profiting handsomely from the extra fast access they are providing to certain investors." book -- int in the cannot believe anybody who read the book said that. pages and pages about it. the whole point of the story is he is creating an exchange that is the one fair exchange for investors. >> i will give you credit for this. michael mckee said, "has anyone ?"ad the book did you read it with scotch or without scotch? >> it is also reminiscent of "moneyball." about comes out that is the disruptive force in the market. it is disruptive entrepreneur

i told brad katsuyama's side of the story. i didf't tell the trader's side of the story. i allly go interview dozens of high frequency traders and people who work at exchanges and people in the bank. i'm telling this story through the eyes of these characters who are trying to figure out how the market works because they're teaching the reader how the market works in their own journey. but i'm not ignorant of all the other points of view. and there is a passage in the book, fairly long passage that's sort of like lays out what high frequency traders would say in their defense but it's not, three not much to say. >> rose: what do they say in their defense. >> everything we do is within the bounds of the law. we add liquidity to the market. when you here a wall street person say liquidity you should run for the exits. what does it mean. they add volume to the market but a front runner as volume. he buys from one else sells to someone else, doubles the volume in the market. we narrow spread which is between the bid and the ask and the market. it used to be much bigger and no

things got really hot between brad katsuyama and prominent figure in flash boys william o'brien over whether the average investor can compete with high-speed traders accused of rigging the market. >> you said in the book, that's when i knew the markets were rigged. it's disgusting you're trying to parse your words now. you can't say that. >> you are quoted that way in the book. >> let's walk through an example. >> do you believe it or not? because you said it. >> let me walk you through an example. >> yes or no question. do you believe it or not? >> i believe the markets are rigged. >> there you go. >> i also think that you're a part of the rigging. if you want to do this let's do this. >> lewis brought the term high frequency trading to light this week with his new book "flash boys" but still supports investing in stocks. >> do you not invest because -- do you stay out of the market entirely because you don't want to be scalped a bit? no, you don't. but that doesn't mean the scalping is okay. to what degree does that system have in it this incredible instability just to able the sca

listen to this altercation between bill o'brien and brad katsuyama. >> he said it in the book. said it in the book, that's when i knew the markets were rigged. it's disgusting that you're trying to parse your words now. >> you are quoted that way in the book but -- >> let's walk through an example. >> do you believe it or not? because you said it. >> let me walk you through -- >> lets a yes or no question. do you believe it or not? >> i believe the markets are rigged and i also think you're a part of the rigging. if you want to do this, let's do this. >> the heated exchange comes after the issue was brought back into the spotlight by michael lewis's book flash boys and after the fbi announced high speed trading initiative. bats as you recall was going to go public, had a glitch on their own exchange and never did. that's sort of the back story. >> these are guys that are in the middle of it and so you get a sense that there's more that we don't know and that's what has people so alarmed. as a guy that's in the market every day, i care about people that have preferential treatme

a lot of accusations were flying around between michael lewis, brad katsuyama of iex and bill o'brienf bats. eamon javers, back fact checking some of those big claims. eamon? >> reporter: yeah, the dust is still settling from the great hft debate on "power lunch" earlier this week. let me play you two chunks of this debate that have both sides going back to play a little factual cleanup. let's start with the first chunk here, i will play this and then tell you what the facts are. take a look. >> my question to bill if he's launching these accusations -- >> i'm launching accusations. >> what market data do you use to price trades? >> we use direct feeds and the sip in combination. >> no, i asked you a question. not what you use to route. what do you use to price trades in your matching engine on direct edge? >> we use direct feeds. >> no. >> yes, we do. you use the same data we do. >> absolutely not. you guys use the sip to price trades. >> that is not true. >> now, look, this is an important issue because the sip is the slower, allegedly slower feed. if they use that, that would allow

we want to move on to bob pisani, who has joined me on post nine, and also with him is brad katsuyama of iex, a new trading platform who emerges as one of the heroes in the book. and bill o'brien joins me, a proponent of high frequency trading. but let's go back to may 6th of 2010, the day of the infamous flash crash. >> everyone else is watching and these these big numbers and their confidence gets affected. >> they are ping-ponging back off each other. >> people are seeing this and those memories of fear are coming back. >> doesn't make any sense. >> what the heck is going on down here? i don't know. all of a sudden we started hearing screaming buy, buy, buy. >> right now we're sitting down 875 points. >> we have now broken 10,000. >> the dow jones industrial average dropped more than 900 points. >> the market didn't work. it broke down. the machines broke down. >> fear came back into the market in a very big way. >> the general public has not been willing to get into this market. >> well, we all lived through that crash, kind of made the hair on the back of my neck stand up. but br

high frequency trading and this is where i stumble on brad katsuyama because at that point he had been wandering through the offices of some of the biggest most sophisticated money managers on the planet and telling them how he found what he found about what high-frequency traders were doing. the people said to me there is a lot of noise about the subject right now. there is no one who can describe this in 2000 night like this guy. i have no idea why he know so much or how he figured it out. it's insane. it led me to him and to figure out whether sergey aleynikov weather was really valuable or should he be guilty and he understood that and understood the tragedy that happened in the judicial process. there's no way anybody who sat in the trial had a true understanding of what had happened. but in him explaining sergey aleynikov he was explaining this thing that happened in the stock market. so sergey aleynikov became a magazine piece. the guts of the story was this young man who was trying to figure out and reform the entire financial system. >> host: we are talking to michael lewis ab