That was an easy point in your comment to respond to. The rest of it doesn't appear to have been based on Chris Stucchio's post at all; you could just as easily have posted it in every thread on HN about HFT. I must be missing something; what is it?
I find this to be an argument I can't dismiss easily.
I've added a link to your comment to the original post. It's important to spread this idea as well.
As a former quant trader and a current (and forevermore) value investor - there is a big difference.
There are literally hundreds of strategies that are high-frequency trading, ranging all the way from those that really perform much of a market-making and liquidity-providing function to perhaps some on the opposite end of the spectrum, where they are abusive and trying to manipulate the market, " he said.
Obviously, we need to get rid of those types of high-frequency traders, but I think the bulk of them are creating liquidity and reducing spreads for us, which has dramatically reduced costs.
No. No it fucking isn't. Furthermore, letting the bad behavior go unpunished means the 'good' behavior gets driven out: https://en.wikipedia.org/wiki/Gresham%27s_law
"Good" HFT strategies are nowadays obvious by one very salient fact: they're not very profitable. Most market making now, for instance, is simply cover - noise trading, basically - designed to disguise the real bad behavior (that the OP conveniently states is just 'very rare'... heh).
HFTs aren't dumb. They know that any regulator or prosecutor will find it very hard to dig through the trading data and discern evidence of illegal behavior from individual trades.
Vanguard's CIO (Gus Sauter) has mentioned in a CNBC interview (see http://www.cnbc.com/id/49434073) that the liquidity providing aspects of HFT tech are valuable - ie, the tools that help the real market makers fill orders on the other side. In the same breath he says the abusive practices (predatory trading) need to be reigned in.
Chris Stucchio's post seems to be defending the "predatory" side of HFT's as "spreading around" the information advantage conferred by hard work and due diligence into the workings of a company.
I'm refuting that by describing the actual effort that goes into attaining the information advantage obtained by Einhorn, Ackman, etc he describes and contrasting it with the effort involved in HFT predatory trading.
Which effort is more important and should be rewarded?