Yup - http://en.wikipedia.org/wiki/Tobin_tax
You can make it very small to cut out almost all of these problems and it wouldn't be noticeable to any non-HF traders. It's not gotten very far in the US and is only partially supported in the EU (though I think there's something amiss with the EU proposal).
But why should we care? The thing I don't understand about the whole debate is, even if the HFTs are milking investors, so what? We're not talking about powerless individuals versus giant companies that we might need to protect, why not just let the investors deal with it by pressuring the exchanges into banning HFTs, or making new exchanges where HFTs aren't allowed? Is it just moral outrage because the HFTs are perceived to profit from "doing nothing"? Frankly, I'm at a loss why do so many people feel bad for the "poor" investors.
My outrage (not sure you could really call it that) is not some moral thing or based on a perception that they are doing nothing.
My issue comes from the fact that securities trading is based on the idea that we buy and sell parts of these securities under the idea we see value in the company. This fits best with a long term hold position but is not really that divergent with a day trader who buys AAPL today because he thinks news later today about some new product will cause the price to go up thus increasing the value of the company. He will sell later in the day because he thinks that it may drop later.
My issue with HFT is that these trades (well most of them) are not based on the value of the security but rather on the act of buying and selling itself. It is meta in a sense.
That in my mind creates a fundamental flaw in the marketplace around the true purpose of a securities exchange.
Do you like the fact that you are able to buy any stock you want pretty much whenever you want? And also can sell any stock you want pretty much whenever you want?
That's a service provided to you by market makers. And it's a service for which they get paid.
But is there any real externality to society, or are you proposing to tax it out of existence just to maintain the philosophical purity of the markets?
