"One way HFTs do this is to place thousands of tiny orders while trying to detect the presence of a large trade being put through (known as a 'whale'). They use pattern recognition software to detect a large, price-insensitive seller or buyer and bid up (or down) accordingly."

A) On every exchange that I know of, the only way that using tiny orders gives you any information advantage is that on certain exchanges fill information is processed faster than market updates. Nothing in that fill information would allow you to determine if there is a large price insensitive market participant in the market vs lots of small price sensitive participants.

B) Nearly every exchange out there allows large participants a variety of mechanisms to hide their order flow. The simplest is iceberg orders.

C) It is a feature, not a bug that prices change in the face of large order flow. Every market in the world, electronic or otherwise works on this basic assumption.

Finally, your example about spamming quotes to create congestion on matching engines is a problem that has already been resolved. The exchanges themselves had a very high incentive to fix this. Their solution was to introduce fill ratios and to fine folks aggressively for violating them. I don't know of any main line exchanges where quote spamming can provide a legitimate latency advantage still.

Regarding A), I think it's about finding icebergs and pinging dark pools.