The sub-penny rule (decimalization) was also mentioned by Chris Stucchio (aka yummyfajitas).[1] And it is extensively discussed in the book "Dark Pools".[2] Because order queues only exist at whole-penny prices, the bots are forced to compete on speed. If it weren't for that rule, there would also be competition on price because you could place offers and get price-priority in the sub-penny interval.

The playing field is basically a DDoS arms race, where the main technique is full-throttle quote-stuffing to push anyone without equivalent hardware and connection away from the front of the queue, and out of the game. (Dark Pools also mentions a conspiracy of special undocumented order types on certain exchanges). The ACM article even admits that the algos aren't even particularly intelligent, just very speedy: "In my experience, most high-frequency algorithms are fairly straightforward in concept—but their success is based largely on how quickly they can interact."

A distributed order book like the one in the Ripple protocol[3] is a much fairer system. The network charges a transaction fee in order to prevent quote spam/DoS attacks, price fractions can be as small as 6 decimal places, and offers are processed in an effectively random order (within each discrete ledger).[4]

1. http://www.chrisstucchio.com/blog/2012/hft_whats_broken.html

2. Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market by Scott Patterson

3. https://ripple.com/distributed-fx/

4. https://ripple.com/wiki/Arbitrage#Rapidly_changing_offers