Market not rigged by HFT: Former Knight Capital CEO

Former Knight Capital CEO: Michael Lewis 'dead wrong'

Investors should not worry—the stock market is not rigged by high-frequency trading, Tom Joyce, former chief executive officer of Knight Capital, told CNBC's "Closing Bell" Tuesday.

"The retail investor should have no concerns at all about high-frequency trading," he said.

"High-frequency traders, assuming they're not doing anything nefarious like front-running or getting favored treatment…just have a different time horizon than anybody else."

Critics of high-frequency trading include noted author Michael Lewis, who made the claim in his book "Flash Boys" that the market is rigged by high-frequency traders who front-run orders.

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Calling Lewis "dead wrong" and the term rigged "irresponsible," Joyce said, "I can't get too twisted about some people who get their PhDs in applied mathematics or physics and instead of pursing a job at Boeing or Google, they decide to apply their skills to the stock market."

Thomas Joyce
Andrew Harrer | Bloomberg | Getty Images

However, he said, "If anybody is front running anything they are breaking the law."

Joyce has no problem with uniform testing standards being applied across the industry, and said he'd do two things to change the system. He would have pilot programs that get rid of the maker-taker rules and increased the tick size.

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"If there is only a penny at risk then a lot of people would be involved, but if the tick size is a nickel than there's more P&L risk and you may shake some people out."

Joyce resigned from Knight Capital in July 2013, shortly after it was taken over by Getco and became KCG Holdings.

"I didn't like Getco's business model at all and I think one of the reasons Getco needed a partner like Knight is they weren't doing very well," he said.

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Knight Capital jolted the market in August 2012, when the firm's computers sent out thousands of unintended trades in August 2012. The company lost $440 million, but Joyce brokered a $400 million deal with a group of investors that kept Knight Capital afloat.

—By CNBC's Michelle Fox. Reuters contributed to this report.