[strongvigilance]

Why have a limit on how close people can be to the exchange? For one thing, everyone would just colo at exactly the minimum distance, achieving nothing. For another, ability to colo is not really an issue. If you wanted to create an HFT startup, colo is not going to be a major cost compared to hiring developers.

[vidarh]

A limit on distance is in effect a speed limit. It means anyone that is able to reach the limit has a shot at competing. Whether that is good or not, or makes a difference or not is another discussion, but you can certainly affect the competitive situation massively that way.

[strongvigilance]

Competition is already high, and colocating is not that expensive for anyone with the ability to compete.

A lot of the loudest criticism of HFT is that it's too competitive - a lot of people who used to make a comfortable living from the bid/ask spread are no longer able to due to computers driving down profit margin.

[breischl]

But they're not really competing on the absolute scale of how fast they can execute a trade, but rather on how much faster than everyone else they can execute. If everyone else is slowed by an equal amount, the game doesn't change at all.