To start, High-Frequency Trading is nothing more than day trading with huge margin and much faster speeds. HFTs are looking for a tick of a penny (or fraction of a penny) before profits are made. Many HFT firms have become very important market makers, i.e. provide liquidity. When you want to sell or buy, now you can get the price you want and in less than a second because of them.
Many people are outraged over that penny that they're making. This is capitalism. People will always find new ways to get around old technology and practices and then profit from them. The profits at first can sometimes be extraordinary, mainly because to do what is being done, the person had to really think outside the box. Eventually, the profit dissipates as more players enter that space. The same will happen with HFT.
The stock market, in this sense, is NOT rigged, most especially for small time investors and traders such as myself. People have a built-in bias many times for crazy new automated (and even more so "algorithmic") technology. In reality, HFT has done more to help small timers like myself. Bid-ask spreads are insignificant, there is a flush of liquidity, broker commission costs have plummeted, and, as with electronic trading in general, one doesn't have to buy a seat down at the exchange to trade!
The real outrage should be aimed at the Federal Reserve and Washington altogether. The Fed is currently in the process of manipulating financial markets so much that I fear a return to normalcy is long gone in the rear view mirror. This is an issue that I have personally researched and written on extensively, and maybe I'll throw some of it up at some point in the future when it is more relevant.
As for Michael Lewis's new book, Flash Boys, don't bother. Yes, Moneyball became a movie, The Blind Side became a movie. But his last book, The Big Short is wrong on so many levels about the financial crisis that honestly it's laughable.
Read, research, and decide for yourself.
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