"yes and sophisticated HFT systems screw large funds from moving into and out of positions with relative ease/fairness." <-- that's completely false. It is precisely because of HFT systems that the capital markets were reasonably resilient, and it is because of the lack of HFT in the current environment that prices swing on the order of 5% during the day
"At least with a specialist, everyone was relatively even in that regard." <-- again, specialists were accused of playing favorites. That's manifestly unfair.
"I can literally create an unfair system by owning the closest supercomputer." <-- That's also not true. It's not good enough to have the lowest latency connection. I can have a slightly slower connection but still have an edge. To put numbers to this, lets say that I was 100 microseconds slower than the fastest person, but I could predict the next price movement 150 microseconds faster (this is due to many factors, including the particular model I use and other implementation details). Then, I would still have a 50 microsecond edge.
"my 'compromise' tax is pretty damn fair considering" <-- this would absolutely screw large funds. As was mentioned by many others, if you tax transactions, market makers will quote wider spreads (and yes, spreads are transactions costs to the large funds moving in and out of positions)
"I'm arguing that there was a cost to removing the specialists, it's obvious now, and we should fix it." <-- NYSE parity (which is a vestige of the specialists) is broken and unfair. Why should someone who sent an order after me get filled before me? Most exchanges have a price-time priority concept, so that if we are sending at the same price but I sent first, then I should get my fill first. The specialists wrecked the idea back then and the current implementation is still unfair.
"the system is just as corrupt now as it was then, just differently." <-- it's actually much less corrupt. I recommend you go and try to build your own HFT, and then you will see that the system now is much more fair than you think. (shameless plug: I started blogging about my experience: http://news.ycombinator.com/item?id=2835656
)
"At least with a specialist, everyone was relatively even in that regard." <-- again, specialists were accused of playing favorites. That's manifestly unfair.
"I can literally create an unfair system by owning the closest supercomputer." <-- That's also not true. It's not good enough to have the lowest latency connection. I can have a slightly slower connection but still have an edge. To put numbers to this, lets say that I was 100 microseconds slower than the fastest person, but I could predict the next price movement 150 microseconds faster (this is due to many factors, including the particular model I use and other implementation details). Then, I would still have a 50 microsecond edge.
"my 'compromise' tax is pretty damn fair considering" <-- this would absolutely screw large funds. As was mentioned by many others, if you tax transactions, market makers will quote wider spreads (and yes, spreads are transactions costs to the large funds moving in and out of positions)
"I'm arguing that there was a cost to removing the specialists, it's obvious now, and we should fix it." <-- NYSE parity (which is a vestige of the specialists) is broken and unfair. Why should someone who sent an order after me get filled before me? Most exchanges have a price-time priority concept, so that if we are sending at the same price but I sent first, then I should get my fill first. The specialists wrecked the idea back then and the current implementation is still unfair.
"the system is just as corrupt now as it was then, just differently." <-- it's actually much less corrupt. I recommend you go and try to build your own HFT, and then you will see that the system now is much more fair than you think. (shameless plug: I started blogging about my experience: http://news.ycombinator.com/item?id=2835656 )