[puzzler314]

I'm not sure a nominal transaction tax would eliminate high frequency trading. HFT guys already pay fees to the exchanges and regulators. Either way, you're right, an increased fee would simply be passed to investors in the form of an increased spread.

[jessedhillon]

Some HFTers execute thousands of trades a day which are cancelled within a few ms -- they are just pinging the market to see how liquidity is at certain price levels, or looking for an opportunity to get out in front of a large quantity trade. This would prevent or impair such traders.