This biggest issue about hft is not speed itself, it is fragmented markets that allow hft to glean order information on one exchange and then 100% legally front run the liquidity taker on all other exchanges with the expectation that the liquidity taker on the initial exchange has more size to trade. That is the biggest problem in today's hft markets. Just because something is legal does not mean that it does not hurt anyone. In this case it does not just hurt a few retail traders but a whole industry that executes trades for you and your IRA or other pension and investment accounts.
Arbitrage has been going on as long as there have been mkts. And once again, just because hft's found a way to do it faster and beat others, I don't think it should be held against them.
Nobody is talking about arbitrage here. I talked about fragmented markets that resulted in hft legally frontrunning large orders that need to get filled on multiple exchanges.
When I listened to an interview with Eric Hundsader it seemed the biggest issue is the fragmented stock market is the only issue. The exchanges get to sell their own dedicated feeds which are faster then the SIP which is illegal but still get to do it. I liked when he was asked about HFT providing better spreads and liquidity and he said he had hundred of examples of price moving multiple percentages in a second and the spread never being more then a penny between bid and ask. Hard to measure spread by bid/ask with this type of speed. So in my mind, drop these feeds from the exchanges, make the SIP the only option and see how it works out. Also I do think HFT will eventually die off. I can't remember where I heard the interview but someone threw some numbers of profits of these firms and their profits are slowing down as the market gets more crowded. It's like any edge.... Too many people and it fades out. Seems it's no different then the early days of online traders and the pit guys. They made money by having the information first and taking out stale orders on the information they had.