Will the market adopt new market designs that address the negative aspects of high-frequency trading? This paper builds a theoretical model of stock exchange competition, shaped by institutional and regulatory details of the U.S. equities market. We show that under the status quo market design: (i) trading behavior across the many distinct exchanges is as if there is just a single “synthesized” exchange; (ii) as a result, trading fees are perfectly competitive; but (iii) exchanges capture and maintain significant economic rents from the sale of “speed technology” (i.e., proprietary data feeds and co-location)—arms for the high-frequency trading arms race. Using a variety of data, we document seven stylized empirical facts that suggest that the model captures the essential economics of how U.S. stock exchanges compete and make money in the modern era. We then use the model to examine the private and social incentives for market design innovation. We find that while the social returns to market design innovation are large, the private returns are much smaller and may be negative, especially for incumbents that derive rents in the status quo from selling speed technology.