[kasey_junk]

Except thats demonstrably not what has happened. Market making has gotten cheaper, not more expensive. Spreads have tightened, not gotten wider. Fees have gone down not up. Literally every cost to trading has been reduced.

The single biggest cost to any market maker is their market risk. Latency is exceedingly cheap in comparison. Any increase in latency raises market risk thereby raising their biggest cost.

[throwaway283719]

I basically agree with what you're saying, but I think there's another point to make - market making is simply not as profitable as it once was.

I've seen estimates that the entire high frequency trading industry made $1 billion profit in 2013, down from $5 billion in 2009. [0]

In contrast, JPMorgan made $6 billion profit in the last quarter, and that was reported as "not particularly impressive"! [1]

[0] http://www.reuters.com/article/2014/04/06/us-dark-markets-an...

[1] http://dealbook.nytimes.com/2014/07/15/jpmorgan-earnings-dec...