Here's one way to look at high-frequency trading: The new market makers. 

Joseph Mecane, Executive Vice President at NYSE Euronext, puts it this way to Advanced Trading: "Once spreads shrank to a penny and technology was being deployed, the former market maker model wasn't really profitable any longer and it was difficult for traders to post large amounts of size and make money...Then traders realized they could post small amounts of size frequency throughout the day and make money. But it's not really possible for a person to do manually so we ended up with automated strategies developing to supply liquidity to the marketplace."  

There's no doubt that high-frequency traders are perhaps the critical liquidity source operating today. The conventional wisdom right now is that the massive spreads we've seen recently are bound to fall back, as competitors rush back in. Once that sort of efficiency again rules, the only way to make money is on volume--lots of it. 

So overall, this is a liquidity source that Wall Street can't do without. The issues have come from other practices that some see as part and parcel of high frequency trading. But even if you take out flash orders and sponsored access, you're still left with what many, including the NYSE, see as the most import liquidity provider. 

This is a good time to mention again that we're sponsoring a free editorial webinar on hi-fi trading, which will offer a good chance to learn much more about the state of affairs.  

We'll feature two leading lights in the field: Kevin McPartland, of the Tabb Group, whose reports on this and related topics are really must-reads, and George Hessler, executive vice president of Lime Brokerage, a pioneering firm in this field. He'll address some of the regulatory implications. The free event will be held at 2 PM on Sept. 10. - Jim