Market manipulation may be fair or not fair. For example, establishing standards of integrity and adequacy of financial resources comprise barriers to market entry, but these are positive requirements, tending to promote fair markets. Having the resources to obtain the use of advanced, cutting-edge computer-based devices may provide a trading advantage over those without such resources, but this has not been deemed unfair by statute, regulation, or self-regulatory organization policy. However, it is plausible that the climb from fair and acceptable high frequency trading to unfair and unacceptable high frequency trading rising to the level of fraud is not marked with clear signs.
Some in academia are unsure of the effects of high frequency trading strategies. Undoubtedly, the ability to discover others’ limit orders is an informational advantage, independent of belief in the efficient market hypothesis. The ability to sniff out others’ intentions in such orders through high frequency means and methods then cancel so as to maximize the sniffer’s personal and professional trading advantage until the price best for the sniffer is obtained would be highly profitable, given a market of adequate size and not too many competitors.
Those engaged in trading should recognize that the duty of best execution and true price discovery are also unclear in material respects. Prices, investor intentions, dealer inventory, broker incentives, etc. are material elements of the dynamic domain of trading financial instruments, and the hope and desire to level the playing / trading field in all material respects would require at a minimum massive re-education (to obtain assurance that all investors are financially sophisticated and sufficiently cognizant of their markets), massive re-distribution of resources (to obtain assurance that all investors have comparable financial capacities to compete fairly against one another, including access to the same advanced computer-based equipment), and a consistent law enforcement and regulatory approach such that the lawfulness of one’s conduct is not vague and requiring numerous attorneys, judges, etc. for fair interpretation.