Yeah, the stock market may be positive sum over the long-term, but it's certainly zero sum over the millisecond-term. Whether it's "retail" or "institutional" that is paying for HFT profits, it's all retail in the end.
Such wonderful marketing terminology.
That’s not actually free, the cost of trading with less information is quite high.
Why do you think market-making is zero sum? Providing liquidity has value and market makers are compensated for that. (Milliseconds of liquidity being appropriately compensated with fractions of pennies.)
Speed of light delays.
Due to the underlying physics of the universe there’s physical limitations on how much liquidity can matter on sufficiently small timescale.
Ultimately the primping value of markets is in information gathering and by flooding the market with trades based on ms timescales you’re masking important signals with meaningless white noise.
Agreed.
> which combined ends up being significant
No. Combined, it is still de minimis. US equity markets alone trade something like $500B/day of volume or like $125T/year.
Trade volume is meaningless in the face of HFT. The very actions you’re defending prove the numbers you just presented have zero relevance and could increase by 100x with zero benefit to anyone.
However step back a second. Quoting a number roughly equivalent to global GDP is frankly silly here, but it’s an easy enough mistake to make when your basic premise is inherently flawed.
If that was what you where trying to describe the second sentence is unconnected to the first.
> half a penny per share traded
That’s far from de minimis. Rebalancing a portfolio now becomes quite expensive over a lifetime. You lose 0.5c selling and 0.5c buying, on say a 10$ stock and that’s 0.1% per transaction, and you don’t rebalance once.