UltraHighFrequencyTrading.com posted a good article on the history behind high frequency trading and the potential consequences of some proposed changes to trading rules:
High-frequency trading might appear to pose threats on the horizon, notes Tabb, but hasty regulation is all but certain to trigger unintended consequences. “It could totally destroy the market,” he says. If rules lock a high-frequency investor into a bid of $102 for even half a second when the market value is $101, other investors could swoop in at $101 and make a dollar a share on the incorrect price. This will create incentives not to quote or provide liquidity, making it harder and much more expensive to invest.
Now the debate is getting political:
While the debate simmers, high-frequency traders are enlisting influential allies in Washington. Republican members of Congress Jeb Hensarling of Texas and Spencer Bachus of Alabama are advocating a slow approach to any regulatory initiatives. In letters to the SEC and the House Financial Services Committee, both congressmen warned not to “shoot the computers first and ask questions later.”