Dear reader,For someone who has spent nearly a decade in pure-vanilla business journalism, I have a love-hate relationship with financial markets. I love their Byzantine complexity—perhaps the only sector that truly mirrors human life, where simple processes become Rube Goldberg machines of mathematical absurdity. Like in life, the winners are not the straightforward ones following the rules. They are the ones gaming the system, finding loopholes within loopholes, building empires on milliseconds, and exploiting inefficiencies that should not exist in the first place. That is one aspect of the markets that I hate.Charles Ponzi understood this perfectly. In 1920, he promised investors an unbelievable 50 per cent return in just 45 days. It was a simple scam—he merely paid early investors with money from later ones, creating an illusion of profits. Ponzi’s scheme collapsed spectacularly, branding financial markets forever as playgrounds for the cunning and unscrupulous.Ponzi famously quipped before his fall, “I landed in this country with $2.50 in cash and $1 million in hopes, and those hopes never left me.” It seems today’s high-frequency traders have transformed that audacious hope into algorithmic certainty, turning Wall Street and global markets into a video game where the house always wins—as long as you own the house, the console, and the fibre-optic cables connecting them.The core challenge facing modern markets is not just speed—it is the arms race between those who build the systems and those who exploit them. High-frequency trading (HFT) firms now execute over 50 per cent of all US equity trades, operating in timeframes so minute that a sneeze could cost millions. These digital desperados have created a parallel universe where geography matters more to traders today than geology once did to oil barons. Being a millisecond faster than your competitor is now worth more than being right about a company’s fundamentals.The evolution from ticker tape to today’s algorithmic mayhem reads like a heist movie directed by someone with a PhD in theoretical physics. Consider this: In 1987, during Black Monday, panic engulfed trading floors within a single session, with the Dow plunging 22.6 per cent in less than 7 hours. Today, a flash crash can wipe out a trillion dollars of market value in just 36 minutes—as happened on May 6, 2010—before algorithms even realise they have been spooked by their own shadows.Michael Lewis captured this absurdity brilliantly in Flash Boys, showing how HFT firms drilled through mountains to lay straighter fibre-optic cables, shaving microseconds off trade execution times. One firm, Spread Networks, spent $300 million to build a cable between Chicago and New Jersey that was 827 miles long—100 miles shorter than the existing route. That difference translated to about, hold your breath, three milliseconds, which industry insiders estimated could mean tens of millions of dollars gained per millisecond saved.The techniques these firms employ would make Charles Ponzi blush. Take “quote stuffing”—flooding markets with thousands of orders per second, only to cancel them nanoseconds later, creating a smokescreen that slows competitors’ systems. Or “spoofing”, where traders place large orders they never intend to execute, manipulating prices before darting in for the actual trade. It is akin to playing poker while openly showing fake cards to confuse the table.Reports say Renaissance Technologies, perhaps the most successful quant fund ever, employs more PhDs than many universities—mathematicians, physicists, and signal processing experts who have never taken a finance class but can spot patterns in market noise that traditional traders miss entirely. Their Medallion Fund, after rocky initial years including a 4 per cent loss in 1989, went on to average 66 per cent annual returns before fees, with net returns of 39 per cent after their substantial 5 per cent management and 44 per cent performance fees.That’s a performance making Warren Buffett seem as cautious as someone hiding cash beneath a mattress.The infrastructure behind this digital gold rush is equally absurd. Firms pay millions for “co-location” services, placing servers physically inside stock exchanges to eliminate speed-of-light delays. The New York Stock Exchange charges tens of thousands of dollars per month for a single server rack in its Mahwah, New Jersey, facility—more than most Americans earn annually, paid just to be a few feet closer to the matching engine.Exchanges themselves have become willing accomplices. They sell privileged data feeds granting HFT firms market information microseconds ahead of regular investors. It is like, as an analyst put it, selling binoculars at a horse race, then secretly auctioning telescopes to the highest bidders. The arms race has spawned an entire ecosystem of technological excess. Firms now employ microwave and laser transmissions for faster-than-fibre communication. McKay Brothers operates microwave towers between Chicago and New Jersey that beat fibre by 4.5 microseconds, charging $14,000 monthly for access, effectively monetising time itself.Chinese markets have taken this to new extremes. During the 2015 Shanghai Composite crash, authorities arrested journalists, fund managers, and even a regulator for “spreading rumours” about market manipulation. It is certainly one way to solve financial scandals—arrest everyone who mentions them. Chinese HFT firms have since pioneered “ghost liquidity”, creating artificial market depth that disappears the moment real orders appear.European regulators tried to tame the beast with MiFID II (that’s short for Markets in Financial Instruments Directive) in 2018, requiring firms to synchronise clocks to within 100 microseconds of Coordinated Universal Time. The result? Millions spent on atomic clocks and GPS synchronisation systems, turning trading floors into something resembling CERN’s particle physics labs.The human cost of this technological arms race often gets buried beneath statistics. Knight Capital’s 2012 meltdown—when a software glitch caused $440 million in losses within 45 minutes—was not just a technical failure. It was 1,400 employees watching their livelihoods vanish because someone deployed untested code. CEO Thomas Joyce went from running a major market maker to selling its smoking ruins to a competitor in four days.In Barbarians at the Gate, Bryan Burrough and John Helyar chronicled the leveraged buyout of RJR Nabisco, capturing human drama and greed. Today’s barbarians write code rather than contracts, but greed remains remarkably consistent. The difference? Henry Kravis took months engineering his takeover; today’s algorithmic raiders strip-mine stocks in milliseconds.Looking ahead, the convergence of artificial intelligence and quantum computing promises to render today’s HFT games quaint. Imagine algorithms predicting market moves by analysing everything from satellite imagery of parking lots to CEO breathing patterns during earnings calls. The next generation of traders will not just be faster or smarter or more compute-capable, they will be prescient, omnipresent, and omnipotent.The ultimate irony? As markets grow hyper-efficient in microseconds, they are arguably becoming less effective at their supposed purpose: allocating capital to productive enterprises. We have built a casino where the house profits from every bet, games run at light speed, and ordinary investors play blindfolded while professionals count cards with supercomputers.Perhaps the real lesson is that every system, no matter how advanced, can be gamed. From Ponzi’s postal coupons to laser-powered trading networks, finance’s history is essentially discovering creative ways to extract money from inefficiency. Tools evolve, speed accelerates, but fundamental human drives—greed, fear, and our stubborn belief that we are smarter than the next guy—remain depressingly constant.Interestingly, India’s entry into this high-stakes arena has been characteristically chaotic. The National Stock Exchange’s co-location scandal exposed brokers gaining preferential access—not through sophisticated tech but through old-fashioned bribery. From 2011 to 2014, select brokers enjoyed split-second advantages worth millions, proving Indian jugaad thrives even in the algorithm age.The Securities and Exchange Board of India (SEBI) struggles to keep pace. Although measures like randomised order delays exist, nearly 60 per cent of Indian trades remain algorithmic. The real innovation? Our companies perfected “regulatory arbitrage”, exploiting gaps between exchange rules faster than authorities can close them. Financial jugaad at the speed of light—or at least Bengaluru’s Internet. As a result, market manipulations are taking place in almost all markets here, in myriad hues.The Jane Street case is the latest in our fast-updating list of financial market manipulations. The US-based proprietary HFT firm orchestrated a complex “pump-and-dump” scheme in India’s derivatives market to manipulate index prices for profits. SEBI took note only after millions of retail investors lost money—and only when the big investors got burnt. Here is a clinical analysis of what exactly happened by the eminent economist C.P. Chandrasekhar. You must read it carefully, because it is a sign of many things that are going to come, and you will hear more such stories soon, given the way things are. So get a hang of the alarming glossary.In sum, whether we are witnessing the maturation of market efficiency or the final perfection of systematic theft remains the trillion-dollar question that will define the next decade of global finance. And quite frankly, these stories make one wonder: in such a game—where stakes soar and rules change at will—the only real winning move might be not to play, unless, of course, you own the casino.Wishing you a meaningful week ahead,Jinoy Jose P.Digital Editor, FrontlineWe hope you’ve been enjoying our newsletters featuring a selection of articles that we believe will be of interest to a cross-section of our readers. Tell us if you like what you read. And also, what you don’t like! Mail us at frontline@thehindu.co.inCONTRIBUTE YOUR COMMENTS