Comment by _delirium

How about rather than adding regulations, just discretize the market's clock? Would a market that performed a trade-resolution tick once every 100ms lose anything important? I believe arbitrage improves efficiency, but I'm less clear on the benefits of extremely high temporal resolution. Currently that's what the incentives encourage optimizing for, among other things. If you predict a market movement 10ms ahead of time, you can profit from that brief 10ms temporal-arbitrage window. And like any arbitrage, that does indeed improve the pricing signal in an absolute sense, in this case by taking a price change that was 10ms later than it "should've been", and moving it up in time via your trading. But it's not clear that 10ms-level pricing inefficiencies are actually something particularly important to smooth out via arbitrage, when you can just define them out of existence by going to a discrete-time market (which are fairly well-studied in the mathematical literature).