[digz]

The 'tens of billions' is also without context of how much money HFT save investors by basically keeping spreads at zero, and nearly always guaranteeing liquidity. Providing liquidity to the market isn't a public service... participants need to be compensated.

[makomk]

"Nearly always" guaranteeing liquidity isn't that useful a service - HFT's liquidity evaporates when it's most needed, like when the markets crash.

[jplewicke]

On the other hand, there's a very good reason why HFT liquidity has evaporated in previous crashes (such as the 2010 Flash Crash) -- the exchanges broke trades in an unpredictable fashion, so that any attempt at market-making would have opened the market maker to considerable risk.

Let's say you step in during a major market crash and buy AAPL when it's trading at $200/share. Let say it then rises some more to $300/share and you sell, only to see the price recover to $500/share. What happens if the exchange breaks your original buy at $200? Then you end up being short on the way from $300 up to $500, even though you were right about the direction of trading and contributed liquidity during market distress.

They've theoretically instituted a fix for this ( http://en.wikipedia.org/wiki/2010_Flash_Crash#Trading_curb ) which will make it clear in advance what trades will be broken, so we'll have to see how HFT and market making responds in the next crash. Bid-ask spreads tend to widen significantly during market distress, which should actually increase the profitability of being a market maker during a crash.