In Defense of High Frequency Trading: "It’s a shameful vilification of the entire industry, says BATs O’Brien on Lewis’ HFTs allegations"

From MarketWatch:

The head of one of the biggest exchanges in the U.S. blasted the allegations that high-frequency trading is rigging the markets against investors a day after the CBSNews “60 Minutes” interview with author Michael Lewis.

Lewis’ new book “Flash Boys” criticizes high-frequency trading, calling the practice “front-running” and illegal.

William O’Brien, president of BATs Global Markets said “it’s a shameful vilification of the entire industry in an effort to promote one firm’s business model and worldview.”

The controversial trading practice, which uses complex computer algorithms to carry out trades that are possible milliseconds faster than regular trades, has become the focus of regulators and industry watchers in recent weeks. New York Attorney General Eric Schneiderman has said HFTs have an “unfair advantage” over regular investors.

MarketWatch spoke to O’Brien about HFTs, in response to Lewis singling out BATs as being part of the equation, in his interview.

MarketWatch: In the 60 Minutes interview with author Michael Lewis he accused the BATs Global Markets exchange specifically of being part of the equation where high-frequency traders “front-run” orders, which leads to rigging of the markets against regular investors. You run the BATs exchange, one of the biggest exchanges in the U.S., do you think the market is rigged? Why not?

It’s a shameful vilification of the entire industry in an effort to promote one firm’s business model and worldview.

It was quite inaccurate, using the four concert ticket example. You’re not buying 4 concert tickets, when it’s really 14,000 in a 40,000 seat arena. It’s the nature of markets, a large buyer or seller is going to impact the market price. Technology has changed that but to say that the market impact a large order has is proof that the market is rigged, has no basis whatsoever.

MarketWatch: You tout technology as positive for market competition, but do you think it’s fair for high-frequency traders to get information earlier than everyone else, even if it’s fractions of a second, because as Lewis suggests, they pay for a faster cable line?

Maybe GM wants to write a book saying it’s unfair for the automotive industry that Elon Musk created a new car.

Let’s talk about it product by product. Our propriety data feeds – That is our depth of book – that shows all the orders on our exchanges at any given time.  We supplement what the SIP offers by giving you all the orders, not just the best orders.  We did an analysis recently that 70% of our customers by count take our propriety data feed. That 70% of our customers execute 96% of our volume, and are trading using that propriety data.  So much of this technology we are talking about is ubiquitous....MORE

HT: MoneyBeat