[growse]

What does this even mean? "Eventually the pool runs out of water". What?

Last I checked, the stock market was a market. Anyone is allowed to play, and like most things in life, you can pay to upgrade (either your connection, your analyst talent, etc. etc.). Look at the recent Barclays dark pool fiasco to find out what the liquidity in a market without HFT and transparent books looks like.

[downandout]

>What does this even mean? "Eventually the pool runs out of water". What?

Well, when you have a pool, and water is constantly being sucked out of it, even a tiny bit at a time, eventually you will have no water left in the pool. Not a hard concept.

[kasey_junk]

But your analogy is backwards. HFT (of the market making variety) are putting water into the pool, not taking it out.

[downandout]

It's not backwards. Market making HFT's are like a casino's bankroll. The only purpose that their bankroll serves is to suck money out of the pool.

[kasey_junk]

Well, let me say it's not backwards, it is just nonsensical. Market making HFTs don't have any built in mathematical edge like a roulette wheel. Further, they lower the cost of trading, they add money into the pool in the form of the risks they take and the infrastructure they create.

As I look around the markets, I don't see a lot of participants that are there to lose money. The ability to make a profit from market activities is central to a correctly working market.

[industriousthou]

I'm pretty sure he was asking how that concept applies to financial markets.