> But why are High Frequency Traders "bad"? Like, do they significantly destabilize the platforms they use? Or is it just that they make profit, and thus the other users of the exchange are losing money? And if it's the latter, how is that not completely illogical? In order for you to make a profit when trading, somebody else needs to lose money. If you ban everyone who profits from the exchange, then there cannot be an exchange, right?
Theoretically you make your profit from long-term value investing. If you think FooCorp has a bright future ahead of them and I think their industry is in decline, I can sell you my FooCorp shares. And theoretically we've worked for any money we make: maybe I've done some research and uncovered a massive fraud at FooCorp. Maybe you're an activist who's going to talk to their management about a major restructuring plan[1].
You can run an exchange just with value investors like that, but you won't get a lot of trades - see the mention of Liquidnet in the article. Maybe you finish your plan a week before I finish mine. So maybe there's a middleman who'll sell you some FooCorp shares (going short), and then buy the same shares off me a week later, taking a cut for themselves. On one level they're providing a valuable service - but you can see why you and I, who did all this research effort, might hate some people who sit there with a computer being a middleman and raking in near-riskless profit. In the same way that we might hate a real-world middleman - a salesman or importer or the like. It becomes particularly acute if the middleman is an HFT selling shares that we "could have got on our own" five seconds later at a better price than their price (because they have an information advantage from e.g. direct feeds being faster than the SIP). In one sense they are still providing value, but it's a strange, counterintuitive kind of value. And of course people remember the times when they bought and the price went down a second later more than the times when they bought and the price went up, and it's easy to blame the HFTs for it.
[1] Why is this not just zero-sum? Because ultimately the market cap turns into real investment. If the market overall thinks that BarCorp has a great business plan and FooCorp is wasting money, then the price of BarCorp goes up and that of FooCorp goes down, and maybe BarCorp builds a new factory and FooCorp lays some people off. Assuming the market got it right, BarCorp's factory is more efficient than FooCorp's, so they build more useful widgets with the same money, and the world has more widgets in it than in the counterfactual universe where the companies' prices didn't change - real value creation