If you accept that the market system is a way of determining the value of securities, then what does HFT mean? How is it possible for real world value to change over the course of milliseconds?
Well, first, real-world price is the price at which people are willing to buy and sell the good. So, if there are trades happening over the course of milliseconds, then you should expect that price to change over the course of milliseconds. There isn't anything unusual about that. For example, if you want to buy oranges, and I say that I will sell you oranges for $1.00, the price is $1.00 to you if you want to buy oranges. If somebody else says they'll sell oranges to you at $0.80 instead, then you'll buy from them instead of me, and the price just fell $0.20. How long did it take the price to fall $0.20? However long it took the other guy to make the $0.80 sell offer. That could have been a month after I made my $1.00 offer, or it could have been 0.2 ms after I made my $1.00 offer. Clearly, if he wants people to buy his oranges instead of mine, it's in his benefit to make his offer as quickly as possible, because after you buy oranges from me, you won't want to buy any more oranges. So if he waits a month, he may have nobody buying at that price.
Conversely, if I offer to sell you 5 oranges at $1.00 and they immediately sell at that price, I'm going to offer my next 5 oranges at $1.20. How fast did the price rise $1.20? How fast did I make my next offer? I could continue selling oranges at $1.00 for a month, but if people are buying a ton of them, and I think I can sell all my oranges for more money, it's in my advantage to up the price as quickly as possible. So, milliseconds after your order went through, I could decide to sell the next batch at $1.20.
There's absolutely nothing nefarious about millisecond trades and price changes, if that's all that's going on. The only difference from "real world phenomena" is that the brokers have algorithms to increase or decrease the share price automatically based on the supply and demand it sees. In a very high trade volume situation, that time matters. If you're faster than your competitor, people are buying and selling *from you* because your prices are always better, closer to the optimal given the supply and demand for the stocks. That's how you make money being faster.
Second, HFT helps you get the "real world value" because the way you get a "real world value" is through iteration. When I decide to sell you oranges at $1.00, that's not the real-world value of oranges. That's a guess I made at the price, assuming there would be exactly enough demand for oranges at $1.00 as I have the ability to supply it. If people are willing to buy it at a higher price, I'll find that higher price faster the quicker I can perform trades and vary my price, and the more trades that I can make. Same if people are only willing to buy it at a lower price. It's no different than, say, if I want to find the square root of a number via the Babylonian Method. If I have a computer running at a low clock frequency, each iteration might take a second. If I have a computer running at a high clock frequency, each iteration might take a microsecond. They both get to the same answer, but a higher clock frequency gets you that answer faster. Again, nothing nefarious about that, and it means that at any one point a human looks at the price of stocks, it's a value that most accurately reflects that equilibrium price between buyers and sellers, because all the iterations are happening very fast.
What *is* somewhat nefarious is that apparently some trading houses are noticing you just bought all the oranges they were selling at a particular price. Then they assumed that you're likely trying to buy oranges from your competitors as well, for a similar price, at the same time. So, because they have a faster connection to the other trading house, they start buying oranges from competitors before your request to buy gets there. When your request to buy arrives, they tell you, "we're no longer selling at any oranges at that price." So the original place just bought up YOUR cheap oranges, and they get to sell it at a slight profit margin. It's not exactly front running, because that would be if your broker, once you've placed an order to buy oranges, instead of buying at your behest, goes out and buys himself a bunch of oranges, then sells them to you at a higher price. He knew what the demand was going to be, because you told him, and he caused the price to go up as a result. In this case, the trading house is buying up more oranges, but they don't *know* that you've placed on order elsewhere. They're making an assumption and taking a risk, based on some algorithm that predicts that type of stuff with some probability. That said, I will agree that's ethically iffy, because they are acting on knowledge nobody else will have for the next few milliseconds, and trading while they have that advantage.