[tptacek]

NO. Not "brokerage fees".

Whatever you pay to your brokerage, you pay on top of the spread. The spread is what you pay to place a market order.

In exchange for the privilege of buying right now, you pay the best offer price. In exchange for the privilege of selling right now, you pay the best bid price.

It's a commission you pay per share; the more shares you try to move, the more you pay whoever's providing you the liquidity.

[pdonis]

> Whatever you pay to your brokerage, you pay on top of the spread. The spread is what you pay to place a market order.

I agree with you for the case of a "buy and hold" investor buying or selling actual shares of stock (with the proviso that the overhead to such an investor is already pretty low since he doesn't execute many trades, so the gain to him from something like HFT decreasing the bid-ask spread is small). But as I noted, many, probably most, "buy and hold" investors hold mutual funds through 401k's, not individual stocks.

For example, I have a 401k. I don't place market orders. I rebalance my portfolio every so often, which, after a lot of intermediate steps, might result in some mutual fund manager placing a market order. But I don't see any of the direct costs associated with that, whether it's paying the spread or anything else. I only see the net overhead of the mutual fund as a whole. (And, as I noted, for a lot of 401k's, like mine, I don't even see that, because the 401k mutual funds are no-load.)

[kasey_junk]

The ability of your mutual fund to provide low fee investments is directly related to their execution costs to trade to rebalance their portfolio.

Whether it is a direct line item on your prospectus or not is immaterial. No load mutual funds are more successful when they have lower execution costs. The biggest driver to low execution costs is an electronic market and then the bid/ask spread. HFT enable both of those low costs.

[pdonis]

> HFT enable both of those low costs

I see how HFT can narrow the bid-ask spread, but how does HFT enable an electronic market? Isn't it the other way around?

[kasey_junk]

HFT doesn't enable electronic markets, it drives down the cost of them. The reason for this is that HFT participants are high volume users of electronic market infrastructure and have a vested interest in making that infrastructure cheap.

[pdonis]

Ah, ok, that makes sense.