I think you are oversimplifying. In the US you can compete on price at a subpenny level by posting at an exchange with inverted (taker/maker) pricing. Shares posted at BYX are really $0.004/share cheaper than BZX, and most smart order routers will take at the inverted exchanges first. Also, changing the tick size won't eliminate the race to 0 (or c) because there are other advantages to low latency execution beyond just getting good queue priority at the inside price. One obvious example is quickly canceling or modifying your orders when the price of a related instrument moves.

I am oversimplifying. You are right that speed still matters for cancels.

It's true that you can post hidden midpoint orders. That's a far cry from posting a public bid at $42.2837 in order to jump the queue ahead of someone posting $42.2836.

Another option is to match orders with frequent batch auctions (instead of continuous double).[1]

1. http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre...

Batch auctions already exist already and still have HFT algo trading.

Further, this paper also assumes a very particular assumption, that there is 1 and only 1 exchange. Even if we wanted that in 1 legal venue (history says we don't) we can't enforce it globally. So venue arbitrage will still happen and therefore there is still a speed advantage.

Finally, this paper glosses over with 1 phrase "it may be necessary to ration one side of the market to enable market clearing" the whole crux of the problem. How do you remediate ties in price that can't be fully filled? IE, what is the matching algorithm? If it is still FIFO, then you still have a race.

Do you think the $.05 tick size experiment will demonstrate the disadvantages you claim for larger ticks?