A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation by Richard Bookstaberwell written and very relevant. has particularly good description the blossoming and subsequent tailing off of statistical arbitrage -- with insight you won't find in some of the other recent, dime-a-dozen journalist books ("The Quants" springs to mind).
The author also makes a cogent argument for a simpler financial marketplace and against yet more layers of regulations. His point is that extra regulation merely adds more complexity, thereby increasing rather than decreasing the chances of a future crisis. The examples of Three Mile Island and the ValuJet crash are particularly illuminating here.
One gripe was when he discussed the economic service rendered by so-called "liquidity providers" (market makers). While I agree that someone providing a two-way market, and thus exposing themselves to risk from price movements, I do not see how the argument applies to trend-following "high frequency" traders, who essentially front-run genuine orders and profit from the resulting price "momentum". In reality, these operators are mere parasites, profiting from their privileged access to the market (through expensive "co-location" agreements with the market operators and sophisticated IT infrastructure). Far from providing liquidity, these guys are sapping it -- "liquidity vampires" wouldn't be an inapt appellation. It's an important distinction and one that could have implications for market stability (witness the recent May 6 "flash crash" in the NYSE).
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