Smaller spreads. Plus I imagine that most retail investors don't make orders large enough that they need to be fulfilled at multiple exchanges, so HFT won't have the chance to get in front of retail.
Actually, HFT is willing to pay retail brokerages like Robinhood to get access to orders from retail investors BEFORE they hit the exchanges. This is how trades are offered for free.
Why? Because they know that they can buy those shares at some reported price then trade them on their own books then sell them at a price sufficiently different from the reported price that they make a profit.
This means that HFT is explicitly getting "in front of retail" and is actually trading at a price different from what retail hears about. That difference goes where? Oh right. Right into the pockets of HFT and out of the pockets of retail investors.
But on a reasonable assumption what he is arguing is that the competition in the marketplace means that they are paying competitive prices for that order flow. They are making money but not much considering what they are doing. And it is massively better than what used to exist.
I know this and agree with it. But as I said above, "The fact that it is better than what existed before doesn't change the fact that we can do better yet."
The first point is that Robinhood is the one that they negotiate with. So the extra profits go there, and not directly to consumers. Secondly the HFT middlemen are still playing market makers, which means that they still are being paid for. There are cheaper ways to make a market work than HFT, and I outlined one above. Third, automated algorithms as market makers have the potential for some pretty dramatic events - such as the flash crash. Alternatives can avoid that.
