Charlie Munger Slams HFT: "They Are Like Rats In A Granary"
None other than status-quo-hugger Berkshire Hathaway's Charlie Munger took aim at the scourge of HFT this morning; blasting high-frequency traders as "the functional equivalent of letting rats into a granary," and exclaims "it does the rest of civilization no good at all." Buffett reminds that HFT is "not a liquidity provider, " explaining that while it does produce volume, that is not the same as liquidity; and while the Oracle opines (incorrectly) that the small investor has never had it so good, Munger is quick to point out that the money HFT makes does not come from heaven and in fact it is the small investor who is hurt by the fact that large investors (who mostly act on small investors' behalf) are severely impacted. Even the usually abstinent Bill Gates remarks upon HFT as "adding no value.. because when the liquidity is needed, it isn't there." Munger sums it up: "I don't like it."
Buffett added, "It's not a liquidity provider. It may create more volume but that's not the same as being a liquidity provider,"
In addition, "To the extent that it is front running, I think society has generally been against front running for good reasons... Here they've gained an advantage by figuring out how the system worked and getting there first and that adds nothing to economic activity."
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