[bwillard]

This may be a myth. Nanex (http://www.nanex.net/) does a lot of detailed analysis of the HFT. Their view, and it is supported by a lot of data and many very detailed, if not intuitive graphs, is that HTF does not help liquidity.

[getsat]

I've read some of their analyses before. Most people automatically associate HFT with the Flash Crash and claim it's bad for the market. The HFT algorithms pulling out of the market exacerbated the Flash Crash by drastically reducing liquidity, so there's some anecdotal evidence at any rate.

[Steko]

The bigger claim that it's bad for the market is because it's parasitic front running.

[getsat]

Frontrunning is definitely shady, but (from what I've read) only a small subset of HFT firms actually have the setup to do it. Those firms have custom FPGAs implementing the minimum amount of the Infiniband spec because anything else is too slow. They also pay a boatload to colocate their servers physically right next to the exchange backbones.

Most HFT is not frontrunning.

[joezydeco]

...but there apparently is enough of it where a 60 mSec advantage is worth the $1,500,000,000 investment.

[getsat]

Frontrunning isn't measured in milliseconds. It's microseconds (and soon nanoseconds).

[javert]

I don't know what it would mean for something to be "bad for the market."