[sumodds]

I disagree with this assumption. The problems with military research, law firms, advertisements are of degree not of its existence. Sure, they have their own problems. But we need military research: which is arisen out of insecurities of nation states, to given protection to their states. Law firms, too have a place so too medical clinics and advertisement firms.

In case of HFT, the argument is not of degree but existence. Military solves security problems of nation states, law firms communal issues of individual citizens, advertisements to help the product reach the intended audience. But what problem does HFT solve other than making a few people very rich.

[gd1]

It reduces the friction in every single financial transaction. There used to be considerably more people making markets, at first yelling at each other across the pit, then manually clicking on the screens, now automated out of existence. Machines not just doing the same job mind you, but doing it much better and faster (and without sleeping, toilet breaks, emotions). So the better consistency/efficiency means these firms can quote tighter and tighter spreads in a price war, which they do. Never has so little money been leeched from the markets by middle men (less money extracted, but concentrated in fewer hands perhaps...). An enormous benefit to society. A benefit that compounds along the supply line.

The reason you hear so much about HFT is because the traditional firms it is displacing want you to.

[sumodds]

I am not as much against automated trading, as I am against High Frequency Trading.

Automated trading itself is still dangerous, in that many of these algorithms are black-boxes. They induce complexity and turbulence into the system. For example the minor bubble just before 2008 crash. May be automated trading/HFT was lucky that, the crash wasn't majorly their part. But it is a ticking time bomb.

Now with HFT it is all the more dangerous, because of the speed of interactions. If I make a bet in 50micro seconds, the space of possibilities explodes on you.

And how is it of enormous benefit to society, when it is concentrated in fewer hands. Again, these micro variations hardly say anything about the quality of the goods being produced than what other traders think about the goods. You are optimizing on a parameter, which does not model the problem you are solving. You might find a minima, but one that has nothing to do with making/distribution of these goods.

[vasilipupkin]

"And how is it of enormous benefit to society, when it is concentrated in fewer hands". So by your logic, Tesla or SpaceX are not of benefit to society because it's concentraded in very few ( 2 ) hands of Elon Musk ?

Secondly, anything that is profitable and legal is of benefit to society, unless it generates obviously negative externalities ( costs for others ) such as pollution

the reason is, our society is mainly built on the idea that everyone can pursue whatever they want and not what some central authority deems to be "useful"

[sumodds]

That is a weak argument :). Not really, there is a certain and rather high possibility that common man can buy Tesla cars. Sure, there is a premium price tag now, since we are still chipping the first blocks in making that technology a n economic reality. And that specific case is all the more important, since as you too argue helps to reduce pollution.

"Anything that is profitable and legal is of benefit to society" is a little misleading. The definition of what is "legal" is an evolving thing. We know it is dangerous, in that can cause huge fluctuation in the financial control system without real benefit for the society as a whole except a very small percentage. I am not speaking of a central authority that decides it, but our common collective consciousness that should decide it. And again there is not one thing, which has no obvious negative externalities. But the question is whether the positives overcome the negatives. In this case, for the society as whole there is little benefit.

Exactly, when the very society is built on that idea that everyone can pursue whatever they want, the access to opportunities should be equal. HFTs are tilting the balance in one way (helping the rich getting richer) , can cause economic crashes, which hit the rich and poor alike. Now the aftereffects of crashes on the rich (except in case of exceptions) are not as tragic, as in case of the poor. For the poorer part of the society, it pulls the rug under them.

[ckdhtc]

"HFTs are tilting the balance in one way (helping the rich getting richer) "

WTF are you talking about?

1. HFT's are full of math and computer science people, which are usually drawn from the middle and lower classes.

2. Before HFT's, the people on the floor were inbred... That's right. There was a lot of passing down the torch since it was the type of job that you can learn by doing it. Oh, yes, and to claim that they were selecting by some "meritocracity", they were selecting for "street smarts" Haha! That only gave them carte blanche to hire their relatives

[ckdhtc]

Why is it concentrated in fewer hands? Yes, there are fewer firms, but many people employed at those firms. For example, Knight has over 1000 people.