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HFTs Benefit Individual Investors, Vanguard CIO Tells CNBC

Vanguard's Gus Sauter tells CNBC that high-frequency trading lowers costs for individual investors.

Much has been made in recent years of how high-frequency traders disadvantage smaller, retail investors, but Vanguard Chief Information Officer Gus Sauter told CNBC that they actually benefit from it.

Speaking on the CNBC program "Fast Money" Thursday, Saunter said high-frequency trading has lowered transaction costs from around 1 percent to a third of a percent. But he did caution that abusive HFT techniques need to be eliminated.

"There are literally hundreds of strategies that are high-frequency trading, ranging from all the way from those that really perform much of a market making and liquidity-providing function, to perhaps some on the opposite end of the spectrum where they are abusive and trying to manipulate the market," he told CNBC.

"Obviously we need to get rid of those types of high-frequency traders, but I think the bulk if them are creating liquidity and reducing spreads for us, which has dramatically reduced costs."

From CNBC:

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio
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