I think the implication was, is the liquidity level of 2007 inadequate and we need the liquidity level of end of 2011 (which is about an order of magnitude higher).

In the end maybe I don't care if these firms just transferring money between themselves but when people's retirement accounts and the fate of whole companies in their hands it seems there should be something preventing this (another meta-algo that punishes aggressive and pushy algorithm...?)

I think the concern is not that they lose someones money, but that they break the whole system. Knight did that the other day, on a small scale, nearly destroying the company.

If that isn't enough to get you to test your software, nothing is. And if they're that crazy, who knows what damage they can cause.

They either need to figure out how to do it safely, or slow the heck down before they break the whole damn thing.