In response to: https://www.youtube.com/watch?v=LTAJwtWoQg4
Tom makes valid arguments for allowing the general market system, in the US, to evolve naturally, which it has, including the adoption of liquidity provider skimming through HFT because – in general, everybody benefits from better technology all around. And monies earned through order routing and fulfillment, however it is done, at the greater and greater speeds and smaller and smaller spreads help to give the end users, the traders, better and cheaper information, technology, and ultimately, execution.
What about IEX then? What about the the adoption of the continuous Dutch auction concept of a pulsed market? And, ultimately, and this is the big big question, how does society benefit from this escalation of trading technology?
Society benefits from investors and investment. Investing can undoubtedly be done at a much slower pace, once a day let’s say, and still perform the function it has in society. Investors are in it for the long haul. Investors care about future returns, growth and general economic success, not just for themselves but for society as a whole.
Trading is not investing.
Trading, it can be claimed, is a required superstructure to allow investing. True. But the original purpose of an exchange was to allow investors to buy and sell, at an investors pace, investment vehicles. Trading was simply the term used for buying and selling. Trading has become an activity that now supersedes investing. Earning a living through exploitation of the friction of the investment machine is what traders do now. How does this benefit society? Does this benefit society? I would posit that trading, in fact, detracts from society. That the energies, talent and monies driven into the trading profession extract valuable resources from society. Traders create nothing, produce nothing and generally earn a living from the grist of the machine.
Here’s a simple question to ask as to the usefulness of traders in society: what would society be like without them?
If we lost all doctors – that would be bad.
Losing all nurses, dentists, police, teachers – bad bad bad bad.
All construction, aerospace, integrated circuit engineers – bad bad bad.
All farmers, all lawyers, all journalists, all accountants – bad bad bad bad.
You get my drift.
Now what if we lost all traders? Meh, good riddance.
If every trader on the planet suddenly stopped trading and and started doing some other occupation what would society lose? Nothing. Investors could still find each other through services that might popup like Ebay or CraigsList for investments. Buyer meets Seller can be done much more cheaply and without the millions of traders who inject themselves into the process. Remember investors could exchange their value for value instruments once a day or even less frequently and still be fine with the prices they get. They’re in it for the long haul after all. Investors don’t need or want to exchange their investment a million times per second. Only traders think they need to do this – and why – pure grist from the machine.
The fact is society could do without only very few occupations in this day and age – but one of them is most certainly – traders.