Discussed for years by traders, high-speed trading is getting plenty of attention since author Michael Lewis appeared Sunday on CBS' 60 Minutes to talk about his latest book Flash Boys, which charges that some traders have an edge over other investors.
High-frequency trading advocacy group the Modern Markets Initiative has fired back that the charges aired on 60 Minutes story are inaccurate. "The markets are not rigged. Saying otherwise is a broad generalization that lumps the vast amount of good market behavior in with a few bad actors," the group said in a statement.
.#ICYMI - This morning, the @TODAYshow aired MMI's statement regarding #HFT and #FlashBoys. See attached pic: pic.twitter.com/VokPZ4MGBk
— Modern Markets (@ModernMarkets) April 1, 2014Lewis, who appeared on the Today show Tuesday responded: "What else are they going to say? The story isn't my story," he said. "The story I tell in the book is a story of Wall Street insiders who realized starting around 2008 the markets behaving funny."
He said that "the market moves at two speeds: one speed for people who pay for access to the exchanges, who put their trading machines right next to the black boxes … and everybody else. And we are everybody else, everybody else being investors in the stock market."
The Federal Bureau of Investigation is probing high-frequency trading to see if the controversial practices give some traders illegal advantages, the Wall Street Journal and Bloomberg News reported Monday. And New York Attorney General Eric Schneiderman has also been investigating whether practices at the exchanges give traders unfair advantage over other investors.
The advantage of even a millisecond could generate large gains for traders if done repeatedly. When asked whether investors should take their money out of the stock market, Lewis told Today host Matt Lauer, "No, I don't think that's the! right answer because you are talking about scalping, it's pennies each trade. It shouldn't go on," he said. "But it's crazy to miss out on investing in the stock market just to avoid being scalped."
Securities and Exchange Commission spokesman John Nester declined to comment on the book but said in a statement that "the staff, at Chair White's direction, is conducting a comprehensive data-driven analysis of a range of market structure issues, including high frequency trading practices and their impact on the fairness, efficiency and integrity of our markets."
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