Contrary to the assertion that the NYT presented to readers in reference to flash trading on stock, more trading does not necessarily increase a market's efficiency (defined in terms of getting the price right). There is a body of research on "noise trading," that shows that increased trading can be associated with movements away from fundamentals, if traders are acting based on rumors and gossip. (Larry Summers was one of the leaders in this literature.) Insofar as noise traders are dominating financial markets, less trading might be associated with an increase in efficiency.
--Dean Baker
