The standard explanation proffered by the HFT owners and customers is they "add more liquidity". This is repeated so many times that laypeople buy it; see typical comments in this thread like "we have traded wider spreads for higher instability". This is not the entire story: the liquidity is for them, not for you . That there is sometimes a spillover liquidity and spread improvement for participants in the wider market is merely a convenient observation suitable for PR. The past and ongoing flash crashes demonstrate that when the liquidity trades against them, they pull this vaunted liquidity quicker than you can blink, literally. They're not going to leave money on the table supplying liquidity into the market if they don't have to.
Another oft-made claim is "anyone is welcome to do what we do, there are no barriers to entry". That is not quite the entire story as well. The defining feature of an HFT firm over the retail investor apart from scale (you need accredited investor-scale financial depth just to ante up the money to the exchange to cover their risk for you fracking up your code and making market on your fracked up orders they then have to make good upon) is access, as the articles this story links to amply documents. They are quite different from most market participants. While it is true that one doesn't have to have special institutional privileges and access to buy these newfangled digital-age "exchange seats", and "merely satisfying" some financial and technical criteria make these seats putatively easier to obtain than the old seats, make no mistake about it, they are more privileged than the old school NYSE exchange seat holders: they enjoy special access to the markets that "non-seat holders" do not, namely preferential positioning in the order flow inspection pipeline, or put another way, they enjoy market making access without market making responsibilities. Just because you no longer have to have a hallowed name descending from the Mayflower, a family history intertwined with the exchange, and an imposing granite edifice for offices to qualify for an exchange seat that buys access to the order flow doesn't mean that preferential access is open to everyone. The day the exchanges open up the HFT level and quality of tick access for the same price as 15-minute delayed ticker quotes, would be the day that I withdraw this observation.
If you chafe at these new special breed of privileged market participants, then an old school remedy is still available: with privileged market access, comes market making responsibilities and market making regulatory oversight. Perhaps not as much responsibility as the exchanges, but definitely more than those without the preferential access, commensurate with their impact upon the market as shown by the flash crashes. Let them have the special access, but make good on the liquidity and spread claims with regulatory enforcement; that is, they continue eating at the trough even when the liquidity and spread moves against them. It didn't stop the old school market makers from coming up with different licenses to print money, so they'll still make great bank (though they'll bitch like a platoon of coked-up noob IB's at Penthouse for having to run through regulatory hoops that didn't exist before, instead of spending that time cranking the next batch of algorithms onto FPGAs), but coupling privileged market access with market making responsibilities did truly impart long-term benefits to participants in the wider market. Arguable if the benefit was proportional, but as long as we will tolerate differential access, we might as well at least maintain the marginal benefits of status quo ante, eh?