I meant efficiency as in low spreads, not as in Fama.<p>I tried to state the mechanism directly, but apparently didn&#x27;t do so very well. I could try again, but I think it&#x27;d be more effective to appeal to authority. Check out &quot;The Race to Zero&quot; by Andrew Haldane at the Bank of England (<a href="http:&#x2F;&#x2F;www.bankofengland.co.uk&#x2F;archive&#x2F;Documents&#x2F;historicpubs&#x2F;speeches&#x2F;2011&#x2F;speech509.pdf" rel="nofollow">http:&#x2F;&#x2F;www.bankofengland.co.uk&#x2F;archive&#x2F;Documents&#x2F;historicpub...</a>). It appears that the presence of too many low latency &#x2F; high frequency players puts the market in a state where it can phase shift, crossing from normal &quot;stable&quot; dynamics to a dramatic spiking dynamic. In normal times, &quot;HFT&quot; increases liquidity and reduces spreads. Every so often those HFT players leave the market suddenly, nearly simultaneously, causing a liquidity crisis.<p>Note that many exchanges enforce a short pause in trading when the market seems to be going crazy. The delay appears to help, so long as traders don&#x27;t move to a different exchange.