I don't see a need to pretend that retail investors trade directly on an exchange to show harm. The reason that some firms pay for access to current information is that it gives them an advantage. An advantage against whom? Is this only a matter of HFT firms trading against each other, and they all have access to the same info? Or, is the info asymmetric and someone is disadvantaged in a trade? I have to think that at some level, HFT will result in higher prices paid by brokers and their clients, and directly or indirectly by mutual funds. It's a bit of a stretch, and I think that may explain why we haven't heard of any civil lawsuits based on these facts. Also statute of limits on some related claims may have expired.
> Or, is the info asymmetric and someone is disadvantaged in a trade?
There is no expectation in the markets that everyone is working with the same information, quite the contrary, the markets wouldn't provide value if everyone was working with the same data. One of the chief reasons the markets are valuable is that they give people incentives to surface (in the form of market activities) pricing information they might otherwise keep secret.
> I have to think that at some level, HFT will result in higher prices paid by brokers and their clients
Quite the contrary, it has led to a race to the bottom such that I can trade for free on my phone from anywhere with internet access at spreads that are nearly nothing. Robinhood is only possible because HFT has made it so.
> and directly or indirectly by mutual funds.
Vanguard, the gold standard for low priced mutual funds, completely disagrees with you.
How do you know Vanguard disagrees with me when I haven't even stated a position. I'm posing a loaded question hoping that someone can make an intelligent and factual argument as to why the sanctioned behavior that the SEC believes is illegal does or does not in fact cause any harm to retail investors. The Nanex commenter does that pretty well, and I think frames the proper issue (if we care about the "morality" of this) as not having to do with HFT at all. If we accept this, it means that my earlier comments here were irrelevant to the topic, as are yours and the comments by other HFT defenders in this thread.
Perhaps he is referring to your comment I have to think that at some level, HFT will result in higher prices paid by brokers and their clients
From the Vanguard comments: This roughly 25% decrease in the end
value of the investment demonstrates the impact of reduced transaction costs on longterm
investors.
So perhaps you didn't state a position, but you posed a thought (I have to think that at some level) or question and Vanguard rather decisively answers that question.
Vanguard is talking about electronic trading. Vanguard specifically states the time horizon is 10-15 years. HFT began in U.S. Stock in 2007. The biggest impact Vanguard experienced was from decimalization (going from eights to pennies, well before HFT). More info/proof: http://www.nanex.net/aqck2/3532.html
