Speeding up the exchange has a non-trivial effect on liquidity. On the one hand, more speed enables high-frequency market makers (HFMs) to update their quotes more quickly on incoming news. This reduces adverse-selection cost and lowers the competitive bid-ask spread. On the other hand, HFM price quotes are more likely to meet speculative high-frequency “bandits,” thus less likely to meet liquidity traders. This raises the spread. The net effect depends on a security’s news-to-liquidity-trader ratio. Empirical analysis of a NASDAQ-OMX speed upgrade shows that a faster market can indeed raise the spread and thus lower liquidity.