[pdovy]

HFT market maker here (my views are my own), there are some consequences that immediately fall out from periodic batch auctions like this.

1. There will still be a race to update your entry in the auction as close as possible to when it runs, because equity markets do not operate in a vacuum. Correlated futures markets don't operate this way (and the regulatory lift to make them do so is separate, and just as hard as doing this for equities), so there is still a race to incorporate the most up to date information ahead of a periodic auction.

2. This _will_ widen the bid-ask spread and reduce liquidity, for the following reasons. There are right now 16 distinct exchanges, excluding dark pools. As a market maker, I want to show my quote to buy/sell to as many participants as possible, and so I quote across a decent subset of these exchanges at any given time. I _don't_ want to get simultaneously filled on all these orders, and am relying on the fact that most of the time if I get filled once, I can cancel from all the other exchanges and then re-evaluate what I think the fair value of the stock is, and put out new orders reflecting that view. The more confidence I have that I can do this, the tighter a spread I can offer, and on the flip side the more risk of overfill there is, the wider I need to quote to account for that risk. In a simultaneous periodic batch auction world anyone can take all available liquidity market-wide trivially, so I have to either reduce liquidity across the market to a lower level to cap my risk, or substantially widen my quote to make that risk economically viable. Both are ultimately bad for counterparties.

3. This would likely serve to entrench existing wholesalers unless they were forced to stop crossing orders internally, or otherwise play by a stricter set of rules (and good luck with that). The vast, vast majority of retail activity never sees a public marketplace, but is executed by a wholesaler - so if you're leaving them out of this picture you're not really changing much.

My personal $0.02 on this is that the latency race is just a turf war between liquidity providers, but has no real impact outside of that arena. There are other areas of needed reform: market fragmentation to the degree it exists today is a net negative IMO. Similarly the market-wide best execution requirement is just extra complexity and creates opportunities for regulatory arbitrage. The proliferation of exotic order types and "differentiating" exchange behavior adds complexity and creates opportunities to game the system. Exchanges charge exorbitant fees for access that create barriers to entry for smaller participants. To name a few.