While HFT has been cited in the flash crash, the Knight Securities fiasco, opening day on the BATS exchange and the Facebook IPO, Sauter said that high-frequency trading has been painted with too broad a brush.
(Read More: Mysterious Algorithm Was 4% of Trading Activity Last Week )
"There are literally hundreds of strategies that are high-frequency trading, ranging 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 said.
"Obviously, we need to get rid of those types of high-frequency traders, but I think the bulk of them are creating liquidity and reducing spreads for us, which has dramatically reduced costs."
(Read More: Cuban, Cooperman: Curb High-Frequency Trading )
Sauter cited the Security and Exchange Commission's Regulation National Market System.
(Read More: Ex-Insider Calls High-Frequency Trading 'Cheating' )
"REGNMS only works if there is somebody to arbitrage and bring the markets together, " he said. "That's what the high-frequency traders are doing."
UPDATED at 3:16pm ET
Trader disclosure: On Oct. 18, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Stephanie Link is long AAPL; Stephanie Link is long JPM; Stephanie Link is long SBUX; Stephanie Link is long VALE; Stephanie Link is long DG; Stephanie Link is long LRCX; Stephanie Link is long EBAY; Jon Najarian is long call spreads in JPM; Jon Najarian is long call spreads in SBUX; Jon Najarian is long call spreads in FB; Jon Najarian is long call spreads in MSFT; Jon Najarian is long call spreads in AMZN; Jon Najarian is long call spreads in VZ; Jon Najarian is long call spreads in RGP; Jon Najarian is long call spreads in MHP; Jon Najarian is long call spreads in FRX; Jon Najarian is long call spreads in CIE; Jon Najarian is long call spreads in BTU; Jon Najarian is long call spreads in ACI; Jon Najarian is long call spreads in ANR; Jon Najarian is long STSI; Jon Najarian is long GLUU; Jon Najarian is long CME; Jon Najarian is long CBOE; Baker Avenue is long HYG; Baker Avenue is long IWM; Baker Avenue is long MDY; Baker Avenue is long F; Baker Avenue is long HAL; Baker Avenue is long KOL; Baker Avenue is long NFLX; Baker Avenue is long BK; Baker Avenue is long MS; Baker Avenue is long AAPL; Baker Avenue is long WFC; Stephen Weiss is long QCOM; Stephen Weiss is long SWFS; Stephen Weiss is short AAPL PUTS.
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