I would argue that those people arguing for more regulation of the industry with respect to taxing profits are just raising the barrier to entry into High Frequency Trading, not stopping it. All of the financial attention has already driven tons of market participants into dark pools, over the counter, and other relatively poorly scrutinized liquidity routes.

The access into hft markets has becomes tremendously easier in the last 10 years and continues to drop, allowing more and more investors to participate if they wish. There is no such thing as a fake trade, if someone buys or sells they are on the hook and are taking risk even if for a fraction of a second.

Which brings us full circle in that HFT is not harming mom and pop investors. It feels like everybody on Slashdot thinks they are getting some kind of rough deal because they haven't invested millions of dollars into trading infrastructure and so can't compete on the same level, but normal investors aren't even in the same game. They want the best price they can get when they move in and out of a position no matter which market they participate on, and HFT makes that happen in the most efficient way possible, probably in human history.

People who argue that HFT adds nothing are woefully ignorant of how market prices converge and how all information is priced into the market. Individuals should be much more wary of being forced to do business through banks, brokers, and other third parties in a 'fair' regulated system. If you want to ensure that the average person pays the most possible per transaction by all means replace hft with some high regulated and by definition inefficient approach to the markets.

You are referring to what was going on with direct edge, this is not how high frequency trading works in general. People have been quick to extrapolate the direct edge case and apply it to all high frequency trading operations across all markets. There are thousands of firms engaging in various types of HFT strategies across all asset classes, many of them doing fundamentally different things to make money. Like any large system there are going to be a few bad apples, but as an industry it has done tremendous good to the average investor. The people purportedly getting 'scammed' are getting excellent prices, due in large part to HFT. These calls for regulation, various taxation schemes, etc are really just going to increase the cost of doing business, drive out all of the smaller HFT shops and leave the big boys Goldman Sachs et al sitting on a mountain of cash. Pretty much the exact opposite effect of what the slashdot crowd wants, largely because many of you are very poorly informed on this matter. People seem to quickly forget what it was like doing business with a broker. If we increase the spreads by driving out HFT the cost per transaction for the average investor is going to go up. Since when has decreasing competition in any space helped anyone?...