Tags: Buffett | Munger | Gates | high-frequency

Buffett, Munger, Gates Criticize High-Frequency Trading

By    |   Monday, 05 May 2014 01:35 PM

Legendary investor Warren Buffett, his Berkshire Hathaway colleague Charlie Munger and Bill Gates, co-founder of Microsoft, have little good to say about high-frequency trading.

The topic has gained currency from financial author Michael Lewis' claim that high-speed trading rigs the stock market.

Munger appears to agree with him.

Editor's Note:
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"Of course they [high-frequency traders] have an advantage cleverly obtained, and of course it does the rest of the civilization no good at all," Munger tells CNBC. "It's the functional equivalent of letting rats into a granary."

Buffett is a bit more restrained about the subject. "It's not a liquidity provider," he tells CNBC. "It may create more volume but that's not the same as being a liquidity provider."

And "to the extent that it is front running," that's a problem, Buffett notes. "Here they've gained a natural advantage by figuring out how the system worked and getting there first, and that adds nothing to GDP."

But high-speed trading doesn't hurt small investors, Buffett adds. "They've never had it so good and high-frequency trading doesn't cost them a penny probably."

As for Gates, he agrees with Buffett's liquidity point. "When you really need the liquidity it's not guaranteed to be there," he tells CNBC.

Not everyone has a negative view of high-frequency trading. "It’s possible to imagine a kind of [high-speed trading] that is completely harmless and in fact beneficial," Laurence Siegel, director of research for the CFA Institute, writes in a report, according to MarketWatch.

The benefit is lower trading costs, thanks to increased competition, he says.

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Legendary investor Warren Buffett, his Berkshire Hathaway colleague Charlie Munger and Bill Gates, co-founder of Microsoft, have little good to say about high-frequency trading.
Buffett, Munger, Gates, high-frequency
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2014-35-05
Monday, 05 May 2014 01:35 PM
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