I don't know enough to have an opinion on HFTs and whether they actually provide liquidity. However, creating sub-markets that are illiquid if you remove them, but become liquid if you add them back in, strikes me as a pretty powerful bit of evidence in HFT's favor. Rebuttals? (Serious question.)
Well, those markets are not fully informative so they are "markets" in some sense not in the "common meaning of the word." Hence the "opaque" adjective. I would not like all markets to be of this kind.
I don't know a lot about this either, and my understanding might be incorrect, but the comparison seems very different to me. These dark pools are full of slow moving, like minded institutional investors that tend to buy and sell the same thing at the same time. In this scenario, my understanding is that HFTs are providing them access to a market that is not as homogenous (the public market).
The whole point of this article is to present a pro-HFT viewpoint. I don't have an opinion either way (yet), but this is clearly written by someone with an HFT bias.
I like to look at the objective facts that are very hard to spin. There aren't many of them, but you can make a lot of hay with them. "We tried not including this thing, and it didn't work, and then we put them in, and it did work" is a very powerful argument, since I value reality and real things over any amount of handwaving and theory. That's something that can't so much be spun as rebutted, hence my phrasing. (For instance, perhaps it's simply a lie. I don't know.)
(The Great (Psuedo-)Intellectual Temptation is to privilege theory over facts. It is not a path that leads to anything useful, but it sure is a popular one.)
Just to throw it out there (I don't have the answers here), but "We made a private dark pool, tiny relative to the size of the overall market, and it was illiquid without HFT" isn't really the same thing as "the stock market would be illiquid without HFT".
