Most high-frequency traders claim to serve a market-making function and improve liquidity in capital markets. This Economist article outlines at least one way HFTs broaden spreads.
Suppose Apple announces that sales of iPhones have been higher than expected, boosting the underlying value of its shares. HFT firms will take up “stale” offers of marketmakers to sell Apple stock—which now look a bargain—before there is time to withdraw them. This is known as “sniping”. In the authors’ model, sniping pushes up bid-ask spreads, as marketmakers must insure themselves against it. The effect also reduces market “thickness”... This is because the cost of thickness—the risk of being sniped on a large scale—increases proportionally with the size of marketmakers’ quotes but the benefits do not: there are usually only a few investors who want to trade in big volumes. In a less thick market, a big institution may find that the overall cost of doing a deal has increased, because the price impact of a large trade is greater.