| > artificially manipulating supply (liquidity) is at direct odds with a free market's ability to do price discovery. [...] there are an infinite number of buyers and sellers willing to transact at any moment. No, there are not. There is a limited (and not really that large) number of active participants in any given market segment, and the 80/20 rule holds among them pretty well too. Thanks to Money Stuff it dawned on me recently that market makers are not really providing liquidity. They provide immediacy. Buyers and sellers have to meet not just in price, but in time too. The spread paid by market participants should be seen as their baked in commission for providing a very specific service: reduced wait time. We can certainly disagree about the societal value of what that service has morphed into, but the reality is that for other than the most liquid[ß] assets, participants are willing to pay extra for the ability to transact NOW, and not in some unspecified time in the future. My personal opinion is that NBBO is an imperfect mechanism to set upper bounds to these commissions. In other words, it limits how much retail transactions can be fleeced for. I am without a doubt a retail investor: I generate maybe three transactions a year, and I'm happy to pay something like 0.15% to 0.25% transaction fee each time, in the knowledge that I am getting a fair price at the time. To me that is a reasonable cost of convenience. My transactions are so small compared to the trading volume that they have zero price impact: in purely financial terms I could be paying a smaller commission if I set up the limit order thresholds myself - but that would take more time and be less convenient. [ß] Read: continuously traded in very large quantities |