Capital Group’s Freadhoff and Vanguard’s Brennan said their firms hadn’t experienced difficulty in having trades routed through preferred venues when they make such a request.
“If we ever gave a broker instructions to route somewhere or to trade or not trade through someone, and we do that, it would be a big deal if the broker did not honor that request,” Brennan said.
Freadhoff said Capital Group doesn’t entirely side with Lewis in the debate his book has spawned.
“We believe he’s raised some interesting questions, but wouldn’t make them in quite the provocative way he has,” he said.
Vanguard’s Brennan agreed, saying the majority of high- frequency traders “play within the rules” and help “knit together” trading across multiple stock exchanges by seizing on small price differences to make a profit.
Vanguard, in a letter to the U.S. Securities and Exchange Commission in 2010, estimated that high-frequency traders had helped to reduce transaction costs in the previous 10 years by 1 percentage point for every “round-trip” transaction, which includes a buy and sell.
On a $10,000 investment over 30 years, the difference between a 9 percent annual return and an 8 percent annual return is about $32,000, according to the Vanguard letter.