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PASQUALE.36.6.2 (Do Not Delete) 8/19/2015 9:48 AM LAW’S ACCELERATION OF FINANCE: REDEFINING THE PROBLEM OF HIGH-FREQUENCY TRADING Frank Pasquale† High-frequency traders automate stock trading, placing thousands of orders over fractions of a second. Their algorithmic strategies are all too often mere rule manipulation or methods of using brute speed to gain advantages over rivals. Normative evaluation of finance’s algorithms must take into account the sector’s social function: to spur efficient, fair, and sustainable investment practices. The complex modeling deployed in high-frequency trading does not reliably contribute to these goals. Therefore, rather than straining to accommodate high-frequency trading strategies, regulators should eliminate many of them. TABLE OF CONTENTS INTRODUCTION 2086 I. THE ACCELERATION OF FINANCE 2089 A. Defining High-Frequency Trading 2090 B. Evaluating High-Frequency Trading 2094 1. Efficiency and Liquidity 2097 2. Price Stability 2100 II. THE MINIMALIST AGENDA OF REGULATORS 2103 A. Punishing the Unfair Use of Early Information 2104 B. Responding to Misrepresentation of Market Conditions 2106 III. DECELERATING FINANCE 2112 † Professor of Law, University of Maryland Carey School of Law. I wish to thank Helen Nissenbaum for the invitation to present on algorithmic trading at the New York University Law School conference “Governing Algorithms.” The interdisciplinary conference gave me an opportunity to present these ideas to experts in computer