Yeah, that one surprised me too. I've read Flash Boys, but I've read a lot of pushback on it, including the idea that it's essentially a very one-sided pitch for IEX.
There are some good arguments that the entire point of HFT is to manipulate the market by front running people who are trying to make actual transactions. Here is a cool video of a few hundredths of a second: https://www.youtube.com/watch?v=K4ENWtfeYp8
There are many purposes for HFT, most of which have nothing to do with front running. Market making is an entirely legal and moral activity which benefits "people who are trying to make actual transactions" and happens to gain a lot from better tech.
Market making is indeed a useful activity, in isolation. And market making is indeed technically what HFT companies do.
However, pouring unspeakable amounts of money, watts and person-hours into completely unnecessary and wasteful infrastructure just because emergent properties of a system mean that billion dollar companies and their owners can make a lot of money by being a picosecond faster than each other in an eternal battle is of extremely questionable utility.
How much fairer and frictionlessier do they become for every picosecond? Is there a limit to fairness and frictionlessyness?
Arguing about HFT feels like you're questioning people about why they're spending billions on excavating single, individual sand grains and the defense you get is "well, sand is an incredibly important building material. It is used in concrete, and we wouldn't have modern society without it". Sure that's true, but why is it that nobody can tell me how what you're doing is actually necessary for that.
> Market making is an entirely legal and moral activity which benefits "people who are trying to make actual transactions" and happens to gain a lot from better tech.
It’s amazing when people are vehemently against something and take a strong moral stand, but you dig a little bit and realize that their basic facts are wrong about the issue.
It is illegal to offer a security for sale that you have no intention of selling. I'm pretty sure the way they make money is to flash out orders and see if there is a response for the now unavailable security, allowing them pricing signals they wouldn't otherwise have. The basic solutions people offer are often of the theme "require the order to live long enough for others to actually trade on it".
> I'm pretty sure the way they make money is to flash out orders and see if there is a response for the now unavailable security
No.
Market event A is seen to correlate strongly with market event B. The correlation is so obvious that multiple participants compete to make the B trade first in reaction to A. It's part of having a healthy market, electronic or otherwise.