I don't know. Building and running fast trading systems sure creates more work and requires additional infrastructure and energy. So many smart people must be busy doing that, instead of something else. Do I understand this correctly: the alternative is that somebody else would randomly pocket this money, without working for it? Doesn't sound so bad to me. A bit less fair, but more human lifetime would be available to work on other problems.

"If only all these smart people were curing cancer instead of designing trading systems!"

Presumably you also object to academics working on entirely abstract problems? After all, they could be doing something else much more useful.

Who gets to decide what the most useful allocation of resources is?

> Do I understand this correctly: the alternative is that somebody else would randomly pocket this money, without working for it? Doesn't sound so bad to me

If that doesn't sound so bad to you, I suggest you haven't thought it through enough. We've been there, in the past. It was worse then.

> Presumably you also object to academics working on entirely abstract problems?

Yes I do. But at least there isn't a large monetary incentive to push people into it. They push themselves.

> After all, they could be doing something else much more useful.

I doubt it. Maybe.

> Who gets to decide what the most useful allocation of resources is?

Interesting question, but unrelated. We were discussing about the overhead versus benefits of high frequency trading. It's about the efficiency of the system itself, not about how to act within this system or where to direct the resources you get out of it. There is no conflict of values, I think.

My feeling is: it's an arms race. The profits that used to be randomly allocated are now either lost to you (if you decide not to participate in the race) or they are predictably spent on the race itself. Nobody wins, except those who enjoy the race for its own sake. Before that, someone was just winning randomly, and got to decide what to do with the profit.

Do those fast trades actually increase the overall efficiency of the system by more than their cost?

If you're holding for a pension, wouldn't a wider spread affect you less than any single other market participant? Like a 1 cent different due to spread isn't going to matter in 30 years?

If I'm holding a pension, I'm paying in regularly to a fund that's managed over a long period of time. If they manage it actively and trade it a lot over 30 years, 1 cent a time will add up.

That's not what they're doing, though. The costs will likely be minimal.

Spreads used to be much higher, sure, but that was not because there were no HFT shops around back then.