I'm not sure how current this is, but the average time a stock is held is roughly 20 seconds [1] and that's definitely not long-term value investing.
I think we're already a long ways away from Kansas Dorothy, and I don't think we'll be going back any time soon.
This is only looking at the volume on public exchanges. There are a lot of regulations around public exchanges which prevent them from operating efficiently. For instance, unless the stock has a very small price, you cannot offer sub-penny prices on this exchange.
Most retail trades actually never see the exchange, they are sold in bulk by brokers to places like Knight or Getco who internalize the order flow. They cross customer orders and take on some orders. Since this does not happen on a public exchange, they can give sub-penny price improvements.
The same happen with dark pools where many hedge funds will send their trade to obtain better executions.
When the market makers who handle these order flow start carrying to much risk on their book, or if they don't want to take the opposite side of your trade, they send it to the stock exchange.
This means that the stock exchange is mostly a place where high-frequency traders meet to offset their exposures to one another. In this respect, it is not surprising, nor problematic that 70% of the volume come from HFT.
I think that dark pools are where the next crash will come from, but I'm by no means a financial wizard. The way I perceive it, dark pools and other nearly-invisible investment exchanges are scary in that the ramifications of dark pool trading can spill over into the light world (as it were) with dire consequences.
We'll see, I'm also thinking that the next crash could just as easily be caused by a rogue algorithm as a rogue trader.
I think Kid Dynamite (a retired trader, non-HFT) has some pretty reasonable articles about dark pools:
http://kiddynamitesworld.com/dark-pools-are-not-scary-shady-...
Disclaimer: my employer helps mutual funds, pension funds, universities, etc. place large orders on the market, using a variety of techniques (including dark pools) to try and smooth out the market impact of these big trades and minimize the the amount clients lose to market participants who are trying to anticipate their short-term trading behavior.
It's not so much evil as it is secret, and secrets with public shares are interesting secrets indeed.
As I said, I don't live in fear of Dark pools or any financial instrument, but it's important to understand that there is a significant difference between the normal sale and purchase of securities and the activity which happens in Dark pools. Otherwise there would be no need to draw a distinction.
There is a natural tension between intermediaries and suppliers in highly transparent and competitive markets. The threat of disintermediation minimizes rent seeking behaviors. Over the last few decades that threat seems very weak in the financial markets, which I believe will have negative consequences for our economy and society.
this isn't the same as being 70% of price movement. HFT is comprised mostly of market makers, who have books that, over the course of the day, are close to net zero. they do a lot of buys, but they also do a lot of sells.
most price moves over the course of a day are actually driven by people who take positional views, and buy or sell large positions. so actually, we're not really that far from kansas
Fortunately, that's only on public exchanges. Most of the liquidity provision happens before trade even hit those exchanges.
Funny given that one of the largest high frequency trading firm, Tradebot, is based in Kansas City MO (not that far from Kansas)
This is one of my favorite charts on the subject, also from NANEX: http://imgur.com/DxWer
Check that out, it gave me a new appreciation for the changes in volume and volatility we're seeing.