High Frequency Traders: Worthless as Undies to Miley Cyrus

A few practitioners have pointed out how little the world would miss HFT should it pack up its co-located servers this evening and join the portfolio-insurance mongers as some of humanity's least productive members. Barry Ritholtz and the guys at NANEX come to mind, some links after the jump.
From Noahpinion:

The HFT arms race 

High Frequency Trading costs real resources. It consumes computing power and the mental effort of smart people. When we decide if HFT benefits the world, we have to weigh these costs against whatever benefits HFT provides.

What are the benefits of HFT? The normally cited benefit is that HFT "increases liquidity". And indeed, since the introduction of HFT, some types of trading costs - commissions and fees - have gone way down. If HFT reduces the total amount that America spends on trading assets without reducing the efficiency of the market, then HFT has created value, by replacing something expensive (brokerages and dealers) with something cheap.

But what if HFT consumes liquidity instead of increasing it? Theory suggests that if HFT consists of a bunch of algorithms trying increasingly hard to beat each other to the punch, then liquidity will go down, and the resources spent on HFT will just be a waste. Now, via Johannes Breckenfelder of Stockholm's Institute for Financial Research, we have evidence to back up the theory.

Unlike other countries, Sweden's government allows some finance researchers to observe the identities of traders, so we profs can see who is doing what. That's hugely important, because in most data sets, we can't tell which trades are submitted by HFTs. Now we can. Breckenfelder, after going through the arduous process of obtaining this amazing data set, has begun to sift through it for insights into the inner workings of the market. His first big discovery is that when HFTs trade against non-HFTs, they increase liquidity, but when they trade against each other, they end up removing liquidity from the market....MORE

Some of The Big Picture's posts:
HFT: What Is It Good For?
Academic paper questions HFT role in volatility and correlation
HFT Pirates And Their Academic Friends
“Liquidity Is The Last Refuge Of The Scoundrel”
HFT Wagon Circling
Major Money Managers Representing Retail Investors Speaking Out Against HFT
HFT’s Unfair Trading Advantage / Front Running
Charlie Munger: HFT Is Evil
Broadening the Debate on HFT & Market Structure

and many more.