The debate continues to rage regarding HFT and how to “control” it via minimum order times, transaction taxes, etc… HFT can be controlled simply by controlling the frequency of the market. In a continuous market, infinitely high frequencies are possible. It is worth noting that continuity is actually a mathematical concept, not a physical concept. At what point will we realize that markets are ultimately physical systems rather than abstract mathematical concepts?
To control the frequency, we need to move away from continuous trading and establish a standard frequency of trading. All venues would need to synchronize to this frequency analogous to the way that electrical generation stations all need to synchronize their input power frequencies to the power grid’s frequency.
Establishing a standard frequency of trading would put an end to the technology arms race by removing the marginal benefits of squeezing an extra microsecond of latency out of the process. If the frequency were 1 Hz (i.e. trade matching occurred at 1 second intervals) then participants would be able to use equipment that could process orders within this time window. Synchronizing venues so they were all in “phase” would remove the opportunity for latency arb. The market data explosion could be contained as could quote stuffing. Order could be restored to what has become a chaotic system thereby reducing systemic risk and increasing confidence of investors. The trading field would be leveled.