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First of all, stop conflating HFT with other, actually useful, forms of algorithmic trading.

Secondly, when an HFT sells out their inventory (which is the most typical response to vol), they consume liquidity on their way out. If they held the inventory what you said would be true, but they don't.

Third, the idea of strong incentives for HFTs in the case of high vol sounds true, but isn't. HFTs flee because their models don't cover the fat tail scenarios and/or there's the concern that they'll get on the wrong side of a broken trade. Some non-HFT algos do this, but HFT basically doesn't. You're trying to steal credit from actually useful people here.

"But the same was true of human market makers of the past..."

This is my favorite part of your rant. You admit that you were lying, but then pretend it's fine because 30 years ago markets were also filled with sociopaths.

Today's real market makers are mostly algorithmic, but they're distinctly not HFT.

> This is an often repeated claim, but things do not become true by repetition.

And yet there you are, repeating lies again and again...

I guess I'd lie too, if the truth meant that my entire career was dedicated to something that is a net negative to society; if it meant admitting that my entire existence consisted of finding ways to capture value that other (better) people created.

Yeah... I'd lie too if I was you.

This isn't what HFTs do.

One common HFT trick is exactly the opposite of what you wrote: they'll attempt to identify probable sellers of large blocks who are disguising their actions by using smaller blocks (they can identify this by measuring latency orders arrive at different exchanges), and then using knowledge of the order books at different exchanges to buy the large block at 10.00 from the seller who was already committed to sell and then sell it at 10.02 to the buyer who was already committed to buying.

They can do this because the institutional seller is using the NBBO based on the SIP, and they're watching 200micros ahead using direct feeds.

There's an important fact to remember though: HFTs aren't really making markets.

HFTs make markets when markets least need liquidity, and they consume liquidity by fleeing the markets when it is most valuable.

As such, an HFT provides service when it is least valuable, and he doesn't just stop providing the service, he actively consumes the resources when they're most needed by society.

edit: downvote me if you like, but what I'm saying is absolutely true. HFTs consume liquidity as vol increases.

> We just need to see the problem as "who can provide liquidity and stability to a market" rather than "who has an unfair advantage"

And essentially every single analysis of THAT problem says that HFTs consume liquidity in times of instability, and "provide" liquidity in times of stability.

As such, HFT destroys the value that people actually care about.

Anyway... no point in arguing about this; the sociopathic assholes who run HFT aren't going to stop, the exchanges aren't going to fire their best customers, and the regulators are all bought and paid for. The only good news about HFT, at all, is that because it's a completely commoditized playing field, their margins tend to get compressed over time, so at least they're screwing us slightly less every year.