An advocacy group for high-frequency traders is punching back after author Michael Lewis' scorching comments on CBS' 60 minutes Sunday.
Lewis, discussing his new book about computer-driven stock trading titled Flash Boys, said the U.S. stock market is rigged by a combination of insiders -- stock exchanges, big Wall Street banks and high-frequency traders -- who can move faster than other investors.
The Modern Markets Initiative, whose members are high-frequency trading firms, fired back Tuesday that the charges aired on 60 Minutes 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.
Lewis, 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 were 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 and high-speed trading on Wall Street, an FBI official said Tuesday. The official, who could not be named because he was not authorized to speak publicly because the investigation is ongoing, confirmed reports by the Wall Street Journal and Bloomberg News. And New York Attorney General Eric Schneiderman has also been investigating whether practices at the exchanges give traders unfair advantage over other investors.
An 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 (Mary Jo) 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."