[rondon2]

You don't ban faster connections the same way you don't ban insider information. Faster connections and insider information will always exist. What you ban is trading on specific information that puts you at a substantially unfair advantage.

If I'm the CFO of company X I have an unfair advantage when it comes to making trades minutes before the quarterly results are release for my company.

[doktrin]

You're still talking about insider trading, and not HFT. What, in the context of this discussion, would you ban?

[rondon2]

You ban trades that are made in an attempt to purchase shares that you believe someone else is also attempting to purchase based on knowledge that you have received because of your proximity to an exchange.

This would be very similar to insider trading in that there is going to be a grey area where it would be hard to prove that the intent was to undercut someone else but having the regulation there would at least curtail this practice somewhat.