Although that's true, it's an unnecessary problem they've created for themselves through their now over-simplified trade matching and naive insistence on time-priority right down to time-frames so small that nobody could possibly care outside of the lame system.
Think about it - even if you got the news the president was shot, or even if the unemployment numbers are significantly off, you'll only be able to take small bets initially due to the lack of confidence in the news until further confirmation.. And confirmation can only come from reading or hearing words, which even if a computer does that, somebody has to type or say them... which means seconds, not milliseconds, much less microseconds.
The 'news' events they're reacting to are financial events at the level of price changes, order book depths etc. They don't react to things like the president being shot, and I'd imagine that if that did happen then at least some of those traders would be switching their models off - the markets could well go crazy at that point and a model won't have been back-tested in those conditions, hence you have no idea what will happen.
I think we agree on what you said, but I take it further and claim it's evidence that the common trade matching rules are badly flawed.
As a simple example, consider that common limit order matching rules often let time take priority over anything else (price, quantity, market maker status). That fails their stated goals. They've got concurrency bugs. It initially came from naive implementations of pit trading rules, but it's now often touted as a feature.
As a result, customers often get screwed into trades they didn't want, or get worse prices than what's fair. PLUS as a result of all the jockeying, they pay higher fees to support the escalating infrastructure costs.
I don't see what's so unfair about effectively a first-come first-served system, or to put it another way, how a fairer system could work.
Perhaps more to the point, exchanges compete for business, if the rules used in an exchange aren't what customers want then customers will move to other exchanges. And obviously the more financial clout you have as a customer the more an exchange is going to care about your opinion of how things should work. So if the banks and hedge funds and the other big players are happy with the status quo, then that's the way it will probably stay.
First-come first-served is fine when there's consensus about the price. A lot of, if not most of, trading comes from people disagreeing about what a fair price is though - the buyer thinks it's worth more, the seller thinks it's worth less.
Consider 3 orders: Bob bids $9, Sam offers $8, and Sara offers $5. If they're entered about the same time, you may end up with a matched price of $5, $8, or $9 with either Sam or Sara getting to sell - all depending on which order the match engine processes them in.
Same orders, same time, huge variation in what is determined to be a fair price with no good reason. All those prices are wrong too. You can debate about what'd be right, but eBay's pricing system is at least an improvement here (one minimum price increment past the next-best order).
It gets worse - consider if one of them entered their order well ahead of time, it probably gave them the worst price - penalizing them for exactly what people want - a quote to see and trade against.
There's tons more examples, but they can get pretty complicated.. email me if you want to talk about it more.
If you're still having trouble imagining a fairer way, work out what would've happened with these three traders on the old NYSE floor system.
Think about it - even if you got the news the president was shot, or even if the unemployment numbers are significantly off, you'll only be able to take small bets initially due to the lack of confidence in the news until further confirmation.. And confirmation can only come from reading or hearing words, which even if a computer does that, somebody has to type or say them... which means seconds, not milliseconds, much less microseconds.