There's a simple enough solution, but I doubt it will be implemented before we have another major crash. A few cents tax on each order placed, whether or not it gets executed, would do these guys in. Not enough to make a big difference to regular traders, including the big funds, but it would stop HFT in its tracks.

Receipts from that tax could go to a new outside regulatory agency after the SEC is disbanded. Anyone working for that agency would be barred from working in the securities industry for a period of time, say 5 years, after they leave the agency. That would include consulting work - no running around the law - and the law would have teeth - a ten year stretch for violation. That should take care of the revolving door problem.

I have one question regarding HFT that I haven't seen addressed anywhere. Some of these trades are short positions, but how does one get a locate if you're only short for 2 milliseconds? Last I heard, you had to first locate a stock before you went short - I think you have 3 days to come up with it if I remember correctly. So where does that leave HFT as far as short trades go? Seems to me these are naked shorts, or do these algorithms also do an instantaneous locate as well?

ebear