Net Neutrality and Modern Exchanges

This analogy is really stretching it.

I appreciate that the author is probably trying to cross the chasm to find an analogy for techies, but its very strained.

Net neutrality didn't mean that you got Netflix 300 micro seconds after your neighbor who paid more, it mean that many people just flat out would not be able to afford Netflix period.

Compare that to the cash equity markets...

Hands up those of you who have been negatively affected by HFT firms having faster quotes, I see that no one has their hands up and that's the correct response as the average investor has it better now than in the past. Fee's are down, access to information is up, fills are much.... much...much better than they were in the past.

For most people here, you'll never make a stock trade that actually matches on an exchange as your trades will almost certainty be matched by KCG, Citadel, or some other internalizer.

You won't care as you'll still get the best price. The only people who get screwed by the cost of running a modern trading firm are the hedge funds and arguably most hedge funds are perfectly fine using the SIP for their quotes, or getting them from Reuters, ActiveData, Bloomberg, etc.

Or put another way, say tomorrow the exchanges do away with their proprietary data feeds all together and everyone uses the SIP. Would the average investor be better off?

I can't see a plausible scenario where they would be. HFT firms would still race to be the fastest, so collocation, specialized hardware and software would still be as valuable as ever. In fact what would change is that you can make a very strong case that there would be less liquidity. Since firms can't use proprietary feeds they are more "exposed", and hence they'll be less willing to take one side of a trade, meaning spreads widen, liquidity goes down, hence trading volumes go down, which has a negative feedback cycle whereby profits go down, hence more market makers leave the business and spread continue to push out.

now you've reached a point where the average investor is very much affected as they'll now pay more for each trade.....

TL/DR, slower feeds means more risk, leading to less trading, leading to smaller profits, leading to fewer players, leading to wider spreads, leading to things being worse for the average person.

Someone want to take the other side of this argument?