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by gaius 5429 days ago
It's more subtle than that. If you wanted to make the sale now and your friend wanted to buy next week when she got paid, then an intermediary would be adding value, purely by being willing to act more quickly. The difference would cover them sitting on the laptop for a week.
2 comments
a3camero 5429 days ago
It is yet more sophisticated for some HFT trading.

Continuing the analogy: Some trading is as if there's a person standing between the two people trying to make a deal and can hear the offers before each party can react and then make their own offers to each party to capture some of the difference (re: HFT profit).

Explanation: In some forms of HFT the key advantage is that they can buy the market data faster than other people so they can see upcoming trades before other participants (undoubtedly there are better citations but here's a decent NYT article): http://dealbook.nytimes.com/2010/06/11/opening-up-the-market...

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CJefferson 5429 days ago
High-speed traders are living in the millisecond range. Do you think the people doing trading on the order of seconds are pleased they are paying to save milliseconds or not? I suspect not, but would be happy to be proved wrong.
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danvet 5429 days ago
What would really happen is that a second trader would enter the market, offer to buy the laptop for 110$, hold onto it and then sell it on for 140$. Actual prices vary and with enough competition, will settle to something that gives the trader still a nice profit and enough cash to insure against the risk of such an operation (the trader doesn't know up-front when he can actually onload the goods and how far the price might move meanwhile).

Of course, if you're not desperate on selling right now and or the risk for the trader is too high (i.e. the minimum price you'll sell right now is higher than what the trader is willing to offer you right now), nothing happens.

Concluding, traders do add utility to a market. And as others have already said, with high freq trading it mostly results in massively reduces spreads (and the temporal utility as outlined in the laptop example essentially disappears).

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