Why should we arbitrarily limit the efficiency of the markets? This just feels like some kind of luddite like fear of technology.

The markets have breaks in place to stop rapid crashes. The flash crash was caused by human placing a bad trade, quickly followed by the automated trading systems leaving the market.

Someone really has to make a much better case then this then pension funds being upset someone has detected their buy order and is driving up their purchase price.

The same reason we arbitrarily limit the gain of amplifiers, so the noise generated by flaws in the system doesn't keep feeding back until it drowns out the signal. Traders in capital markets are producing social value if they cause better decisions about allocating our resources, not the same decisions a fraction of a second sooner because of a greater misinvestment in network hardware. Front-running a trade that's already been decided on is just scalping.

be careful about the idea of clamping down on legal tax-paying businesses based on how much "social value" they are producing. It is very hard to judge that and it is subjective. One could argue,I am not arguing it but one could, that lots and lots of web startups produce very little social value. Should we ban them too?