If you cancel faster than the market, you can stand first in line for everything and leave the line for those occasions where the trade isn't profitable. I don't see the difference between jumping to the head of the line for Good and standing in every line but jumping out for Bad. And I don't see how line-jumping adds liquidity. A bid I can never hit because it will be gone any time I'd actually want to hit it isn't much of a bid, at least as far as I'm concerned. If it's gone before anyone can hit it, then I think there's a definitional question of whether that's really a 'bid' for the intents and purposes of liquidity provision.
Now I'm not saying such bids are Bad. They could be helpful in all sorts of ways. But I'm not sure that provision of liquidity is one of those.
>"A bid I can never hit because it will be gone any time I'd actually want to hit it..."
Why should they let you hit them when they expect to lose? The HFT firms have some pretty decent traders. They're not going to sit there idle and let you pick them off. If you want to win this game, you have to be better than the competition.
They shouldn't, and I don't expect them too. The point is that someone who is effectively jumping to the head of the line for profitable trades isn't really "providing liquidity".
When I think of liquidity providers, I'm thinking of market makers who post prices at which they either buy or sell, offered long enough to allow other traders to hit either.
Now I'm not saying such bids are Bad. They could be helpful in all sorts of ways. But I'm not sure that provision of liquidity is one of those.