[Workaccount2]

My actual gripe is with where that value comes from, and what it's true cost to society is.

I'd argue that pulling these people out of moving society forward is just another form of externalized cost. The stanford guy who figured out how to halve the cost of solar in 2012 never got to realize it because $750k/yr to do stochastic modeling of cattle feed to (secretly) overcharge farmers for futures contracts was just too enticing.

[TheAlchemist]

The way I see HFT, is that previously this money was going to brokers and banks.

Now, most of this money is going to HFT shops, but you could also make an argument that some of it stays with the investors, since spreads are much smaller now.

There is 0 cost to society, maybe even a small gain.

As for moving society forward, I don't know. If not in finance, most of these guys would work for big tech companies trying to actively make kids and adults addicted to screens.

[Workaccount2]

These are just first order effects. I'm talking about second and third order effects that I would argue make the value prop of tighter spreads enormously negative to society on the whole.

Liken it to the government deciding to spend 40% of the budget on roads. Suddenly the roads quickly get pot holes filled, the lines are seemingly always freshly painted, cracks are all filled, and even mildly uneven roads gets freshly paved.

The first order effects of this would all be positive. The transportation dept. could talk all day about benefits to everyone. Everyone would love the great roads.

But spending 40% of the budget on roads is insane, and the second and third order effects would be disastrous to that society.

[TheAlchemist]

If we're talking second and third order effects, then we should bring up the capitalism vs socialism debate.

In a separate single example, it's fairly easy to point out what's the right thing to do - as you do with your Stanford guy example. However, history show us that it usually turns out to be disastrous in the long term. Maybe this Stanford guy will make several millions $, and then go back to desiging how to produce those half price solars at scale.

[thijson]

One benefit I've seen is that commission free trades wouldn't be possible without payment for order flow. I remember the old days when it cost a lot to do a trade. Also the stock price tick increments used to be higher. That's been steadily eroded.