Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?
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Notes -
The proper pricing of commodities and equities is actually of great value to society. The Physics Ph.D in a Manhattan office building high-frequency trading corn futures doesn't see anything except numbers on a screen, but corn farmers in Iowa (and consumers of corn like chicken farmers) benefit greatly from accurate and liquid futures markets in corn.
In order to consistantly make money in trading, one has to buy low and sell high. This inherently provides a price-stabilizing effect. Buying when prices are low causes prices to rise; selling when prices are high causes prices to fall.
You can have extremely accurate and liquid corn futures without high frequency trading, and without sucking thousands of man-years of the highest human capital down the drain. We're not arguing about banning future markets, but I'm pretty sure corn farmers still can grow corn if you take away synthetic collateralized debt obligations and other modern financial vehicles.
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There is also great value in market depth and liquidity, which these actors also provide.
Intuitively it does seem like there's some point past which there isn't any more "real" value being added (like the difference between transaction in a second vs a quarter of a second, or whatever), but the processes which get to that point are what enable all the good stuff that came before it.
I feel similarly about LBOs: they seem like a stupid legal trick, but all the conditions that allow them to happen are things you want your economy to have.
A good thought experiment I heard from Russ Roberts to help think about the tradeoffs involved is to consider the extreme possibilities. On one end, we could extend open market/active trading hours to be 24/7/365. On the other end, we could just have one market at one moment each day, say, everyone brings their orders at exactly noon every day, all the orders that can get filled, do, and then they go home until the next day. I don't really have all that much of a personal opinion, but it helps one think about possible tradeoffs.
A tool here would be to look at how this worked in the past, before HFT was enabled. Were things better or worse in terms of pricing?
I think the markets not functioning as effectively on weekends is pretty garbage, for instance, but we've long passed the point where HFT software can lead to major failures, not to mention the thousands of smaller ones that bugs can introduce. The capabilities of AI to analyze and make decisions with HFT capabilities is only going to make things worse.
Maybe I'm just latching onto it for the heck of it, but the fidelity of time a second provides should be slow enough to keep a human in the loop and reduce the iterations for software failure.
As I talk through it, though, I'm still unconvinced that this sort of regulation is possible. With the time horizon of a second, I have little-to-no doubt that shadow markets would develop between traders, even if explicitly outlawed.
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