What I meant in #2 was that there are market structure rules about things like minimum price improvement levels and how widely a buy or sell order is circulated before finding a cross. The HFT guys are masters at exploiting the market microstructure to extract alpha. Google SOES bandit if you need further examples.

As for #3, naked access is a relatively new invention and the rules are sufficiently constructed to virtually guarantee that only implicitly informed parties are ever going to see "naked" access.

Circuit breakers (actually the lack of them) is one of those things that enabled this to occur. The party in question essentially copied a strategy that was used by the HFT guys to soak up the offer. The seller got liquidity but it came at a very dear price.

And that's really the issue here: circuit breakers are a compromise between liquidity and price discovery. If the exchange suddenly sees that price discovery is trending outside of a range, they shut down trading. If the problem is a systemic market one, then this probably is a good idea. But if price movement is because of new information, then all the circuit breakers in the world wont help you because as soon as trading resumes, the new regime will be in play.