What you are really proposing here is to take away competition from the market. This would mean that you need another way of assigning the winner(buyer or seller, in case there are multiple ones wanting to buy the same stock); Some ways of doing it: randomly, alphabetically, shoe size, networth etc. You get the drift... The question is, will it be fair?
In capitalist systems winners are assigned based on open and fair competition, but then again there are other political views and systems.
I think this is the important point and one that seems to be lost on a lot of traders: Yes, what you are talking about is logical, but we as a society have the right to say: No, this is not beneficial to everybody.
The way many traders argue, they seem to have little shame saying that they want the system to give them a hand when they have made a bad decision.
> If unexpected news comes out today that a company is the target of an adverse event like a DOJ lawsuit many market participants will want to react as fast as possible to the news.
No, I think the first thing you want to do is kick yourself in the butt for investing in a company that went down like this. If you invest in an oil company and it has a huge spill, the stock will go down and you will lose money. Don't like that? Don't invest in oil companies with a lousy safety record. Or invest yourself in making sure that the company that you gave your precious liquidity doesn't mess it up.
I would further claim that there are very few truly "unexpected" news. Traders are just a little too much in love with not really caring about what they invest in. At least not as much as they are in love with the money they make or the image that they are the "market makers" who provide the liquidity that we all need.
A DOJ lawsuit happens for a reason. Oil spills happen for a reason. If you have made a bet, you are the one who has to provide reasons for your bet. I cannot believe there are that many people who argue they should be able to rip off as many people as possible once their bet has gone sour. That the one thing they really need is to be able to rip others off as fast as possible. And that all this is somehow reasonable and useful.
I understand nobody really likes being the loser, but that's how capitalism works - filtering out the bad apples by having them go down in flames. Well, that's what it's supposed to be like, anyways.
Capitalist competition is inherently wasteful - advertising, lawsuits etc. - but overall it allocates resources more efficiently than any alternative that's been tried.
In capitalist systems winners are assigned based on open and fair competition, but then again there are other political views and systems.