I dont make it sound like there is one firm that puts out orders. I dont know how you could draw this conclusion. Nobody would consider regulation to have this abusive game stopped if we dealt with just one misbehaved kid. Think for yourself....
And you failed to address the point that there are participants who get special privileges (flash orders, order flow, front running, sub penny) for doing absolutely nothing, taking almost no risk, and not being required to make markets. Specialists had certain similar privileges but they made markets in good times and bad, and took risk. Let me add.. Look at fas and faz. That is a direct result of arbitration and the ability of these machines to trade them so efficently as to push both towards zero at all times . Same thing is happening to the market on a slower timeframe, and larger scale. You cannot take billions of dollars out of this market and at the same time not taking on risk(or very little risk), and not have it destroy the market in the long run (maybe short). End result is all the real risk takers are driven out and all we are left with is these machines, with their special rules competing against each other. Im directly speaking about the arbitrage machines. Estimated 70% of the volume in our nyse are HFT's compared to 30% just a few years ago. There are less and less risk carriers everyday in our markets. The 1000 point decline shows exactly how vulnerable we are.
What this paper explains is that you have some DUMB traders out there, with some DUMB algorithms and OLD AGE trading methodologies, who are PREDICTIBLE! Trading is all about taking advantage of dumber than you, VWAP and other predictible algos are just one example in the middle of others.
Probably for you and your system, but to make a general statement like this I think is quite a bit too conservative.
Of course taking advantage of people who did not recognize the same value as you did in one stock should not be put in the same basket... as this is the purest form of trading, all between 'wise' people... which can easily be replaced with machines and simple linear models by the way!
those getting special favors ,ironically are the banks /houses...these are the companies that lobbied to let banks trade and trading houses become banks,had to be bailed out, have made record profits in last 4 consecutive months and who are at the moment lobbying house/senate to make banking laws more lax...not that it would hurt them but the trading community and those with paychecks should refuse to keep their cash in these institutions..since DC wont do a thing
it is astonishing how hard it is to get filled. even with a 2k position on MSFT you can't get filled. the other day I was waiting on the bid and everyone got filled/pulled except for me. my tiny 2k share position was holding up the bid and no one would hit me. finally the algos swooped back in on the bid, which meant I was last in line again cause of the subpennying. from there it swiped up three cents. the only way you are getting filled is if the price is gonna go at least two cents through you. how anyone can justify subpennying is beyong me. it is blatant fraud.