I always had questions about the liquidity on offer though seeing participants flee the market in black swan events. HFT liquidity could be illusionary - its only there when its not quite required similar to how the bank "only offers you a loan when you don't need one". Of course this is exactly the point when liquidity is required; normally there's sufficient liquidity in normal times from market participants. Its easy to offer liquidity in normal times; harder to do so when no one else wants to offer it.

Offering liquidity is not equivalent to offering free money. The offer comes at a cost.

> normally there's sufficient liquidity in normal times from market participants.

Not really. The spreads were terrible before HFT market making.

It isn't obvious that the retail investors are that excited by sub-second liquidity.

Speaking personally, I'd even be happy to wait several seconds to see if someone else is willing to pay a better price.

That's not how things work. You would see much less demand/supply for a particular stock at every price level, which means you'd pay much more to buy less and would have to pay much more to sell less also. There are no upsides to having fewer market makers.

> you would see much less demand/supply

Why? If the HFT firm was willing to offer me $X 2 milliseconds ago they are probably still willing to offer $X now. It isn't like there has been time for anything to change; there are going to be short periods of time where there is literally no new information.

And they are just as likely to be offering me more now than less as conditions change.

if they weren't able to move their price 2 milliseconds later, they wouldn't offer $X in the first place.

We obviously can have liquidity on in-between timescales, because we had it before modern HFT trading, right?

The average person may be overly paranoid about HFT, but it doesn't make sense to say they benefit from it, because they are not going to be in a position where they benefit from an execution in a fraction of a second.

Price improvement of fractions of a penny has gotten silly too. It's easy to think of it as more significant than it is, until you figure it as a percentage (or the spread for that matter).

It's kind of like how ultra-sensitive people are to gas prices...

Before HFT, we had enormous spreads and expensive trades on many instruments in many markets.

Smaller spreads lower costs for everyone: institutional, retail etc.

When exactly are you thinking of? Are you old enough to remember before decimalization? Do you consider that "enormous"?