HFTs cheat
HFTs do not save investors $400 million a day -- they remove $400 million in profits from the hands of day traders, and give it to themselves.
The big, BIIIIIG thing that really has to be changed with HFTs: Eliminate cheating.
What do I mean by cheating? At present, the HFT systems (at least the successful ones) on NYSE and NASDAQ exploit software flaws in the electronic trading systems to watch orders come in and place it's AHEAD of already in-queue orders placed by everyone else. So, you place an order to sell some stock for at least $5.00 a share, and someone else places a buy order at $5.03. Great, $0.03 per share profit for you! Not so fast -- the HFT system will see your orders come in (NOT predict them, actually see the trades become enqueued), and then use software exploits in the trading floor software to force it's orders ahead of your already enqueued orders and take away your profits. Instead of you selling your stock to the other guy at $5.03, it will buy your stock at $5.01 and sell it to the other guy at $5.03.
Apparently this has been brought to the attention of NYSE and NASDAQ -- they don't care, they are privatized (so they don't have to serve public good or anything), and HFTs (due to trading numerous times a second) are their primary customers, not legitimate stock traders.
The SEC (Securities and Exchange Commission) seems to simply be able to wrap their heads around electronic trading in general, let alone do anything to help make HFTs play fair.
In reality, HFTs would still be formidible traders even if they played it straight, but not as profitable as they are now by cheating.
The proposed EU rules don't sound like they'd help much. Well, hopefully the software approval rule, they would have kind of a "type approval" -- make sure the code that actually interacts with the trading floor does not use exploits to cheat, and don't even look at the actual trading logic (which will be frequently changed, needs fast turnaround on changes, and should be proprietary to the trading firm anyway.)