Lowering costs should allow more firms to enter the market, not just pad the profits of existing participants.

If a HFT firm is richer because they're smarter, I don't have any problem with that. That's how investing works. Developing smarter ways to analyze data, setting prices accurately, having a market that responds to new information, these are all social goods.

I am less convinced that everyone trying to be in the same datacenter as the NYSE (https://www.bloomberg.com/news/articles/2016-04-13/inside-eq...) adds any value for society.

I mean, I'm all for lowering costs in the HFT industry, it'll mean the company I work at makes more money -- I just didn't realize you were arguing for the industry, not against it. I don't think any HFT firm would disagree with lowering costs to themselves, the same way they'd prefer that CPUs were never upgraded (so they didn't have to waste money buying the latest ones).

Co-location is good because it commoditizes the closest location to the exchange. Speed always matters, even in randomized auctions, even if you have artificial latencies added to your order, even if... Without co-location done the way it is now, you get into situations where a single firm buys the actual nearest location, and has a monopoly over being the fastest competitor. Now, anyone can access it.

> Now, anyone can access it.

Where "anyone" = any investment firm with millions of dollars to spend on their IT. :)

Yes, things costs money. It costs on the order of several thousand per month (on the upper end), not millions of dollars -- moreover, this is commensurate with the cost of actually running such a data center (which the exchange sponsoring the colo typically does). I would also argue that, for anyone who actually receives any benefit from being colocated, several thousand dollars a month in operating costs is not prohibitively expensive.