The stock market is not rigged, but investors are being ripped off by high-frequency trading that takes "pennies off of everyone's trade" on an almost riskless transaction, Craig Hodges, co-portfolio manager of the Hodges Funds, told CNBC on Wednesday.
"I don't think 'rigged' is the right word. I think there's a fleecing going on of America," he said in a "Squawk Box" interview. "Basically, I have more respect for a guy that takes a gun and robs a store. At least there's a risk with him." Hodges acknowledged that high-speed trading does not effect his investing returns, "but it leaves a bad taste in our mouth."
His comments came a day after the heated debate on CNBC between IEX's Brad Katsuyama and BATS Global Markets President William O'Brien that stopped trading on the New York Stock Exchange floor. They battled over the premise behind Michael Lewis' new book "Flash Boys" in which Katsuyama is quoted as saying the stock market is "rigged" because of high-speed trading. Lewis was also on "Power Lunch" Tuesday.
The debate about high-frequency trading continued Wednesday on "Squawk Box." Ed Keon, portfolio manager at Prudential's Quantitative Management Associates, said institutional investors are "not being victimized" by HFT.
"I saw our head trader yesterday," Keon said. "If high-speed trading went away will our trading costs go up or down. He said the costs would probably go up. There are pluses and minuses."
He added, "The societal issues is: Who's going to provide liquidity the next time there's a market event? That's a legitimate issue." But he also stressed that the playing field should be level.
"We monitor those costs so we're getting the best deal for our shareholders," Keon said. "If somebody was jumping in front of us on a regular basis, we would see that."
Lee Partridge, chief investment officer at Salient Partners, told CNBC: the high-speed trading firms "are just providing liquidity."
"We've got more liquidity in the markets than we ever have before where it's cheaper to trade 50 shares, 25 shares, 100 shares, as well as a block of 10,000 shares," he said. "Customers are trading more and more."
Partridge acknowledged that high-frequency trading firms are making money in the process. "They are scalping the market. But bid-ask spreads are the tightest they've ever been. Commissions are tighter than they've ever been."
It's cheaper for individual investors to get into the market, he said.