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Despite the furor over whether high frequency trading is "rigging" the U.S. stock markets, more regulations aren't necessary, Harvey Pitt, a former chairman of the Securities and Exchange Commission (SEC) told CNBC.
"We don't need more regulation or less regulation. We need smarter regulation," Pitt said. "The rules that are already on the books take care of any of the problems that are raised by high frequency trading."
The publication of journalist Michael Lewis' latest book "Flash Boys," set up a heated debate in the financial world over whether traders using powerful software and algorithms have "rigged" the stock market.
The book details how the founders of new trading platform IEX grew disillusioned with high-frequency trading and what they saw as its legalized "front running" of slower traders.
"I don't think the markets are rigged," said Pitt, who as SEC chairman from 2001 to 2003 adopted reams of rules in response to the accounting scandals of the late 1990s.
"The problem isn't so much high frequency trading. There are quite legitimate uses for it," Pitt said. "What is a problem is when people put in numerous bids with absolutely no intention of executing a trade or having those bids met. All they're doing is trying to test for variances in the pricing of securities so that when they are ready to trade they can take advantage of the information they've found."
On Friday, the Justice Department announced that it was investigating high-speed trading for possible insider trading abuses. Earlier last week, both securities regulators and the FBI said they were looking into potential abuses by high frequency traders, such as front-running trades and "spoofing," or orders which are placed to create the appearance of market demand and which are later cancelled.
"The Justice department can only bring cases against violations of existing statutes. And if they're already investigating that's a very clear indication that they think that they already have statutes on the book that will make certain conduct unlawful and result in successful prosecutions," said Pitt, who is currently the CEO of Kalorama partners, a Washington, DC- based legal compliance and corporate governance consultancy.
Pitt noted the Department of Justice is considering whether some traders are getting faster access to information. "That would be tantamount to regular insider trading and is already a violation of law. And putting in bids that you don't intend to have executed, in my view, is market manipulation, and is already a crime under U.S. law."
Pitt noted the SEC brought spoofing cases against some traders while he was chairman of the SEC in 2001.
"There is enough regulation on the books," he said. "It just has to be enforced."
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter