[tptacek]

Aside from the strange example you provided, what's funny is that you focused on a 1 cent price movement. The average bid-ask spread before high-volume electronic trading drove it down was 12 cents --- that was money in the pockets of middlemen. Before electronic trading, the spread could have been measured in dollars.

[rondon]

That is crazy logic. Because international telephone calls used to cost over 12 cents a minute I should let my ISP charge me 1 cent a minute whenever I use Skype internationally?

[harryh]

You should realize that market makers are actually providing a service that they get paid for and be happy that due to automation & competition the price for that service has dropped by an enormous amount.

[rondon]

I don't want that service, I want to buy something without someone else inserting themselves as a middleman.

[kasey_junk]

So you'd rather put a massive amount of money into a clearing firms account so they will allow you to trade, pay the DMA, seat, & transaction fees to the exchange, pay for the software developers who connect you to the exchange, and the researchers that make sure the exchange you connect to is providing the correct prices. All those lawyer fees you pay to make sure you are in compliance with an exploding amount of regulation is a fun item to ponder as you ride the train into the office. You'd rather buy and hold shares you aren't sure are priced correctly because you don't know when the opportunity to buy them again will be. Don't forget getting the fun opportunity to explain to your employees how the exchange busted 1 half of your trade and you went from the best trading day ever to the worst, and by the way every one needs to go home cause we are out of business? Simple, start a trading company.

Maybe you'd rather just skip all the complication of computers and go back to the good old days of monopoly exchanges and pit traders. Then you get to deal with fees that are 10x of what they are now, the joy of dealing with over the phone brokers and the excellent opportunity to get to buy and sell from specialists who are given cartel status by the monopoly exchange, I'm sure they price things with the retail investor in mind right? At least you won't know how bad you are getting screwed cause there is zero transparency into the market. Sounds good? Get some legislation passed that gives NYSE and Nasdaq back their monopolies.

There is probably a third path that involves some sort of governmental agency bid out to a third party for a ridiculous contract that has massive reliability issues and doesn't innovate at all. That might be better, I don't know.

Me, even though I know way more about the dirty pool that goes on in the electronic trading space, I'll stick with sending my personal orders through a large retail broker that charges me minimal fees & expense ratios, and allows me access to the lowest bid/ask spreads in history with instantaneous execution to a broad array of risk management and investment opportunities that only big banks used to get.

I'd really like access to a massive free social network that doesn't sell my data to the highest bidder, but since I'm unwilling to bank roll that, I can either deal with the social network we have, or opt out.

[tptacek]

Every time you place a market order, that is the service you are buying.

[harryh]

Then you don't have to use it. You can issue limit orders instead of market orders as described in the post that started this thread. Lots of people do want to purchase liquidity though which is why these folks exist.

(In reality, assuming you're a small retail investor, you don't even have to do what this blog post says. Your transactions are small enough they aren't going to hit the exchanges anyways.)

[kasey_junk]

I know exactly what you mean with this comment, but the idea that anyone can "opt out" of the current markets is ludicrous.

I wouldn't attempt to sell titanium to the Amish for the same reason that no rationale investor attempts to sell stocks without the existing market maker system.