High Frequency Trading Regulation - White Paper - The Trading Profits of High Frequency Traders - Baron/Brogaard/Kirilenko - November 2012
On December 3, 2012, CFTC Chief Economist Andrei Kirilenko, along with professors Matthew Baron and Jonathan Brogaard, released a preliminary draft of a research paper, "The Trading Profits of High Frequency Traders." Commissioner Bart Chilton said that the study would make it easier for regulators “to put forth regulations in a streamlined fashion. It’s a key step in the process and it should fuel-inject the regulatory effort going forward.” 
From the paper:
"In this paper, we examine the link between HFT speed, liquidity provision, and trading profits. We have four main findings. First, HFTs are profitable, especially Aggressive (liquidity-taking) HFTs, and generate high Sharpe ratios. Second, HFTs generate their profits from all other market participants, and do so mainly in the short and medium run (seconds to minutes). Third, firm concentration in the HFT industry is not decreasing over time, nor is its profitability. We conjecture this is tied to our fourth finding that HFTs profits are persistent, new entrants have a higher propensity to underperform and exit, and the fastest firms (in absolute and in relative terms) make up the upper tail of performance."
For a more in-depth look at the paper, it is embedded below.
- High-Speed Traders Profit at Expense of Ordinary Investors, a Study Says. New York Times. Retrieved on December 10, 2012.