It benefits people who need to raise cash, because they can do it more quickly and generally with lower financing costs than in an illiquid market.

It benefits people who have cash that they want to invest, because they have more opportunities to do it and more visibility over which investments are safe and which ones are risky.

Therefore it benefits society by transferring cash from people who have it now but need it later, to people who will have it later but need it now. Enabling and facilitating actual socially good activity, like manufacturing goods, providing services, etc.

So there are definitely benefits to people outside the finance industry. However, in order to accept any of that you do ultimately need to believe, to some extent, in the market as a means of allocating resources. You don't need to think it's perfect, or that it shouldn't be regulated, or even that it is the fairest system, but you need to accept that it is the system we use. In a totally state-planned economy, finance wouldn't work or even make sense.

Interesting - I'll definitely have to think on that one, thank you! I suppose another required assumption (implied but not explicitly stated) is that the activities undertaken by "people who need to raise cash" are, on balance, good things for actual people. Despite the fact that we overwhelmingly hear about the negative examples, I guess this is _probably_ true? Ugh, I suppose so.

I wonder if there's a way to derive those same benefits (people doing useful work have access to funds) without the exploitable loopholes (sufficiently clever and evil people can shuffle numbers around and fabricate wealth without _actually_ affecting loan-availability)? I suspect that's probably a provable invariant - you can't have one without the other. Shame.

If you own equities (individual stocks, ETFs, mutual funds) then you benefit. More liquidity means lower bid/ask spreads which means lower transaction costs and higher returns (since you are paying lower transaction costs, more of your money is invested and it adds up over time) for every investor. The NYSE minimum tick size used to be 12.5 cents, then 6.25 cents.

Once HFT firms started becoming more widespread, the spread lowered significantly. SPY bid/ask spreads are 1 cent on a share that costs ~$450. Some assets even have sub-penny bid/ask spreads.

The traders that create units of SPY get better spreads on the underlying stocks too, which benefits you as well by reducing asset fees and more accurately representing the NAV by lowering transaction costs. The S&P 500 is made up of 500 stocks, it is much more cost effective to assemble a basket of stocks with 1 cent spreads than 6.25 or 12.5 cent spreads.

Liquidity does the same thing for every market, it increases the speed and accuracy of price discovery and lowers transaction costs.

> If you own equities (individual stocks, ETFs, mutual funds) then you benefit.

Right, yes - I as a relatively-wealthy individual certainly benefit from an effective market. But does _society_ benefit from the existence of a stock market in the first place? Does the increase in wealth for those at the top outweigh the comparative-loss (stagnation relative to inflation) to those who can't afford to buy-in? I find it hard to morally support a system whose justification boils down to "it redistributes wealth to the wealthier without providing any net-increase in quality of life".