Then HFTs would still win but pricing would widen out since some liquidity is made available because of ability to hedge in another product. Think about if I'm quoting SPY because I can buy/sell the basket better than my quotes. If the feeds are delayed, I'm less confident in where the basket price really is, so I'm going to demand more compensation in bid-ask spread to put up a price. This wouldn't be a big deal in slow markets but when things really started moving, most derivative liquidity would be pulled entirely.

In single names HFTs mostly use these feeds to protect themselves from other high-speed traders and they want the granularity of information for their models. They're already faster than retail guys and banks and always will be. It's not an "unfair advantage" like people think. They just have to get on it if any competitor gets on it, similar to all the fast lines. If 20 HFT shops get on a new fast line, none of them are making more money from it.

I don't know, but I can't see very many good side-effects, though can think of some negative ones. The first thing I would think is that participants would gravitate towards trading where the SIP is to avoid transit latency, reducing competition for those exchanges that run their own data center and SIP. Also, I'd imagine that there would be a greater risk of getting run over, so spreads would widen to account for it.