[tptacek]

He did answer your question. The value of arbitrage is liquidity. Liquidity is extremely valuable. Here, I'll quote Harris:

Liquidity is the ability to trade large size quickly, at low cost, when you want to trade. It is the most important characteristic of well-functioning markets.

Everyone likes liquidity. Traders like liquidity because it allows them to implement their trading strategies cheaply. Exchanges like liquidity because it attracts traders to their markets. Regulators like liquidity because liquid markets are often less volatile than illiquid ones.

Market are not magical. Just because something may be fundamentally worth X does not mean you can automatically find someone to take the other side of a trade based on that valuation.

[three14]

I still don't get it. I accepted that liquidity is valuable. This specific case adds no liquidity. None. Both sides are participating in the same market, and have enough information to make the trade. They will make the trade if no one interferes. Someone else comes in as a MITM, and collects the spread. What value did they add?