[ccurtsinger]

Daniel claims that volatility is actually lower with HFT when you look at implied volatility, a predictive measure of volatility. Lewis uses actual historical volatility in his argument. You shouldn't use a predictive measure when analyzing past performance:

Implied volatility is computed base on the difference between an option's selling price and an algorithmically-determined price. That's exactly the sort of information any trader would rely on to place bets. When the calculated value is higher than the price, there is profit to be made. Any decrease in trading latency will allow traders to buy up instruments selling below their estimated value a bit quicker, driving these numbers closer together.

[tptacek]

That's not the only distinction being made here; the other argument is that Lewis is capturing a lot of factors other than HFT when considering volatility; for instance, the collapse of the collateralized debt market.