[joe_the_user]

The thing about the by-hand system is that the seat-holder both had a monopoly and provided the service of keeping the market evenly liquid.

When trading becomes purely a commodity, it impels those at the center of exchange process to get their money some other way. Remember that Bernie Madoff's ostensible business was electronic trading. Some have argued that he stayed in business as long as he did not because people thought he was honest but because people thought he was front-running (an illegal but sustainable business). The high-frequency trading system I've heard of sound they are effectively front-running whether legal or not.

One argue that both short and long-term investing provide value to the economy since the investors have to have some idea of the value of the underlying stock. I would argue that anything that involves entirely gaming the exchange process doesn't have that quality.

You could argue that if the high-frequency traders in the end take less rent than the seat-holders previously did, then it's all good. Well, there's problem that no one's supporting the market. You can point to one or another immediate cause of the flash crash but I'd argue without some intentional market-making, some version of another flash crash is going to be inevitable.