By Stephen Gandel
April 2, 2014

FORTUNE — Arthur Levitt isn’t likely to give Michael Lewis’s new book Flash Boys an Amazon five-star review.

Levitt, one of the best known advocates for average investors and a former head of the Securities and Exchange Commission, says he disagrees with the view that high-frequency trading has been bad for individual investors, and that he has seen no evidence it has made markets less fair.

“I’m not persuaded the average investor is not getting a price that is just as good as a high-frequency trader,” says Levitt, who is also an adviser to one of the biggest high-frequency trading firms, KCG Holdings.

Lewis, on the other hand, is persuaded. Since Flash Boys came out on Monday, Lewis has mounted a full-frontal assault on high-frequency trading, saying every investor has been victimized by it. In an interview with Charlie Rose on Tuesday, Lewis said that fast trading has turned the stock market into a two-tiered system in which certain Wall Street firms have access to information on how stocks will trade before everyone else. “It’s just shocking,” Lewis said. “I don’t really understand how you have a group of people operating by different rules than the rest of the economy.”

MORE: Is the SEC protecting high-frequency traders?

But the fact that Levitt is willing to defend high-frequency trading and has acted as an advocate for one of the industry’s biggest firms may give some critics pause. “I simply don’t know what evidence Lewis has for saying that high-speed traders are ripping people off,” says Levitt, who says he hasn’t read Flash Boys yet, but is reacting to what he has heard Lewis say and what he has read said about the book.

Levitt says he does have some concerns about high-speed trading. He says he has told SEC officials that they should look into co-location, which may allow some firms to get market information before others. He says he was also disturbed by reports that high-frequency traders were getting news releases ahead of other investors. Levitt says that may have violated disclosure rules. And, he says, like all areas of the market, there are likely some bad actors.

But he says there is no proof that high-frequency traders caused the flash crash, manipulate stock prices or do any other of the ills often associated with them. And Levitt says he has come to that conclusion after thinking long and hard about the issues surrounding high-speed trading.

Levitt, 83, became head of the Securities and Exchange Commission in the early 1990s and stayed for nearly eight years, one of the longer runs as head of the investor protection agency. While at the SEC, Levitt pushed through rules that lowered the cost of trading for average investors. He railed against the tricks that companies play to goose their financial statements, and the account firms that let them. After leaving the SEC, he wrote the well-received book Take on the Street.

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About five years ago, he signed on as an adviser to Getco, a high-speed trading firm that also operates so-called dark pools, where stocks can trade off the traditional exchanges. Last year, Getco bought Knight Capital Group and changed its name to KCG.

Levitt says he was hired by Getco when it was considering going public and helped the company recruit board members. He said he also helped the firm figure out how it could explain what it does to average investors. Levitt says he is still an adviser to KCG. He is also an adviser at the bank consulting firm Promontory Group. His bio on Promontory’s website says Levitt is “well known as a champion of the individual investor.”

Dennis Kelleher, who runs the consumer advocacy group Better Markets, says there is an overwhelming amount of evidence that the majority of high-frequency trading is “predatory.” And he sees parallels to 2008. “The high-frequency trading industry is dark and unregulated just like derivatives were before the financial crash,” says Kelleher. “Arthur has stood up for investors over the years, but he hasn’t always been on the right side of issues. And I think he’s wrong on high-frequency trading.”

 

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