High-Frequency Trading

Gartman: Why I believe in high-frequency trading

Gartman 'a believer' in high-frequency trading

Commodities pro Dennis Gartman describes himself as a "believer" in high-frequency trading.

Gartman, the editor and publisher of The Gartman Letter, said high-speed traders are the only ones adding liquidity into the markets, and they've helped drastically reduce transaction costs. His comments come a week after journalist Michael Lewis set up a heated debate in the financial world over whether traders using powerful software and algorithms have "rigged" the stock market.

"I'm going to get in trouble for saying this," Gartman said Monday on CNBC's "Squawk Box." "But I'm a believer in high-frequency trading. You can't believe how many times people have attacked me on the Internet. It gets ugly."

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Bid-ask spreads, or the difference between selling and buying prices of a stock, were up to 25 cents higher per trade than decade ago, before stock prices turned to the decimal system, Gartman contended.

"I think it's a fair shot," he added.

Others don't seem so sure. The Justice Department announced Friday that is was investigating high-speed trading for possible insider trading abuses. The debate on high-frequency trading has also put scrutiny onto "dark pools," or alternative trading platforms that operate outside public exchanges

Around 40 percent of all U.S. stock trades occur "off exchange," and critics say it leads to problems with price transparency. Gartman played down the effect dark pools and high-frequency trading has on prices.

"I know what the price is on the exchange," Gartman said. "The dark pool is not going to be manifestly different, if it's a penny different from what the exchange is. It's not going to be different at all."

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Gartman also commented on his strongest moves following Friday's selloff in big name technology stocks. He said going to cash doesn't seem like a bad idea.

"I've always told people there are three things you can do in a bull market," Gartman said. "You can be really really bullish. You can be pleasantly bullish, and you can be neutral. It's time for neutrality."

Gartman advised investors to head to the sidelines after Friday's deep selloff in momentum stocks wiped out 2.6 percent of the NASDAQ and hit other major averages. On Monday morning, U.S. stock index futures pointed to a lower open as technology stocks continued to sell off in Europe and Asia.

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Stocks took a drastic turn lower Friday morning, hours after traders digested a lukewarm U.S. employment numbers for March. Gartman said the selloff made him believe the US couldn't reach 3 percent GDP growth his year.

"For whatever reason, the switch got turned," Gartman said. "The game changed. All at one time. And you had to change."

Cash was not a wise investment during the stock market's bull run last year, Gartman said, but it doesn't look like a bad move for the next few weeks.

"It's not a bad thing," he said. "I'm amused at people who say, 'You can't just hold cash.' Of course you can. ... If you held cash for the last year, you felt it, You lost money, or you were lagging well behind. But cash right now might not be such a bad place to be for the next month or two."

—By CNBC's Jeff Morganteen. Reuters contributed to this report.