'The market is rigged' - Interview with Flash Boys author Michael Lewis

Mr Munger said that high-frequency trading was "the functional equivalent of letting a lot of rats into a granary".

The central thesis of Flash Boys, which is published, with an updated final chapter, in paperback this week, is that electronic trading has rigged the market against ordinary investors, particularly in America.

Computer algorithms allow high-frequency trading (HFT) firms to "get ahead" of institutions investing on behalf of our pension funds and savings schemes.

Because HFT firms execute deals in tiny fractions of seconds they are able to "front run" human traders who are buying stocks and make a small "skim" on the deal by pushing prices up or down.

"It is inserting itself everywhere," he said.

"High-frequency traders pay for an advanced look at [market] information so they are in an unfair position. They know the prices before the ordinary investors they are trading against.

"If you can trade at light speed, you can make thousands and thousands of trades in a second.

"It is offensive to me that you have essentially rich traders skimming off of middle class savers. Weaving that unfairness into the financial markets especially at a time when inequality is a problem seems crazy to me."

Mr Lewis says the major question is how to structure markets for stocks and shares as well as bonds and currencies as computers slowly and inexorably take over from human traders.

One reason, he argues, is the "revolving door" between the Wall Street banks and firms engaged in high-frequency trading and the regulators themselves. A "cosy club" has grown up, he says.

But, although that may be the case, Mr Lewis actually argues that the story of Flash Boys is one of hope.

And that's because the main witness in his book, Brad Katsuyama, a trader at the Royal Bank of Canada, has set up an exchange called IEX which seeks to eliminate "predatory opportunities created by speed".

Goldman Sachs, for example, has committed to IEX, and is the exchange's biggest source of orders.

"There is a path through the market [to a solution]," Mr Lewis told me. "The main characters in Flash Boys set out not only to expose the problem but to fix it.

"They built a market place that they think is a fair market place where investors meet on equal terms."

"Automation delivers choice and fosters lower commissions - which benefit the end investor.

"The claims that the buy side have been ripped off for years may have held sway a decade ago, but I have sat in countless meetings with buy-side and sell-side firms and vendors - all working together to improve the market place.

"Here in Europe if you are not endeavouring to fix the problem, you are part of the problem."

Mr Lewis is not convinced, saying that perverse incentives to make ever greater profits means that culture change in financial services is glacial, if happening at all.

"When the incentives are screwed up the behaviour is screwed up," he said. "And it creates a culture where screwed up behaviour is normal, it is even praised because it increases profits.

"Unless you change the incentives, you won't change anything else."