[jstanley]

How exactly do you believe high-frequency traders "eat up" pension funds?

The only time any limit order gets executed is when it is the best price available. From the other perspective, the price a market order is matched at is the price of the best limit order available.

In the absence of high-frequency traders, the best price available will be worse, not better.

[wcoenen]

Example of how HFTs would "eat up" money, at least in the past: many instruments trade on multiple exchanges. So when a trader wants to execute what is conceptually a single large order, in practice this order may need to be split and routed to multiple exchanges.

HFTs will see the first order executing on one exchange, and will then jump in front of the rest on the other exchanges. For the trader it looks like large orders don't work; he can't buy every offer that's on his screen. Only part of his order works, and a price rise prevents the rest from executing.

Nowadays this may be less of a problem, because large traders now probably all use software that tunes injected latency to make all related orders arrive simultaneously at their different destinations. But I would still be careful about assuming that HFTs can't do any damage anymore.

[jstanley]

The HFT can't just know that you're going to place a market order, and then jump in front of all of the other limit orders that you're going to match with, without offering a better price than the other limit orders.

The only way that could work is if the lowest price you can buy on exchange A is $100, and the HFT knows that you're about to submit a market order, so he buys up the $100 orders until the best price is $101, and then he lists what he bought for sale at $100.99, which your market order matches against. OK, in theory this works.

To avoid this, you can just submit a limit order at $100 instead of a market order. You should always use limit orders for exactly this reason, anyway: even in the absence of foul play, the order you're trying to match against might get matched by someone else in the mean time and you could get a worse price than you expect.