3. To the extent that these HFT systems are in fact using flash (or other) traffic to get in front of orders and advantage themselves they are dramatically increasing the violence of market moves. A stock trading at $20 that has a bid come in with a limit of $20.10 would normally fill (assuming sufficient depth) at $20; this does not materially move the market. But if a HFT system "sees" that order, steps in front of it and buys up all the shares at $20 and then re-sells them to the customer at $20.04 (one penny better than the next best offer at $20.05) it has caused the current "last" price to move where it otherwise would not. Multiply this by millions of shares an hour and the impact on price moves could be tremendous. While I understand that many people like the move of the last two weeks in the market, the fact remains that what goes up can also come down with equal violence.
That is not how flash orders work. First if there was sufficient depth @ 20.00, the order would get filled immediately and not be flashed. Second the order can not be flashed any worse then the NBBO, so they only offer price improvement to a client.
