[lxgr]

> the vast majority of activity is speculation

Where do you draw the line between (useful) arbitrage and "pure speculation"?

Much of what is commonly known as speculation is actually an important mechanism for price quality or liquidity.

Obviously there are limits, and there are ample opportunities for making a one-sided profit without regulations, but people often seem to miss the value that arbitrageurs tangibly provide to them: Being able to exchange foreign currency at very tight spreads almost 24/7; being able to buy and sell even not commonly traded stocks etc. are often a function of that.

[kqr]

I think you and I are saying the same thing! What's counter-intuitive about many well-functioning markets is that the vast majority of what happens is superfluous in one sense, but its side effects are desirable by most!