Its insane that you think this is the case.
The markets are an incredibly important part of the economy and this technology does not only simply value a company.
The markets are an incredibly important part of the economy and this technology does not only simply value a company.
Having a well-priced, liquid stock market is obviously important. Mises even set it as his threshold for socialism - a country that has an independent stock market is not socialist.
But that's not the same as appreciating the current state of stock trading. Sinking millions into millisecond improvements does not improve pricing. Identifying large trades and running pump-and-dump just before they clear doesn't improve liquidity. Running years-long fraud to get early leaks of Fed decisions helps no one.
A lot of what happens in high speed trading today is actually harmful to the market as a pricing and liquidity tool. Insider leaks from the Fed weaken market confidence for everyone. Flash crashes are a new horror born entirely of algorithmic trading. The list goes on.
I think it's entirely reasonable to appreciate free markets, even libertarian economic policies, and still consider the start of trading today alarming and detrimental to the economy.
I'm fully prepared to argue we don't have that, though. Traders are throwing many millions of dollars at projects without even a pretense of improving market accuracy, or adding meaningful liquidity.
Algorithmic trading hasn't been especially good for accuracy - we suddenly have flash crashes with markets dropping 30% and recovering, based on no change in fundamentals. High speed trading hasn't been much good for it - paying to move your trading servers slightly closer to a T1 backbone doesn't improve liquidity meaningfully, or accuracy at all. And we already have serious, systematic fraud: was the money Goldman Sachs spent buying insider leaks from the Fed really good for the industry?
I take your point, and I don't begrudge finance its enormous economic role. But suggesting that the industry's growth in the last ~decade is about improving accuracy seems pretty questionable.
Finance companies overwhelmingly make money by more accurately allocating capital whether that's channeling investment, arbitrage, executing a trade before the other guy, whatever. In every case that's money that went to a better place to do more economic work faster. It's what finance companies are for.
Yes there's the occasional dodgy deal or rip off, but to read your post you'd think that is the only thing financial companies ever do. In reality trillions of dollars spent on research, technology, infrastructure, business growth and jobs got there via financing. Better financing means more and better quality of all of those things.
The quote being a single analyst calling up a trading desk for a market rate, sometimes getting a reply, sometimes not, if getting a rate often from not the stated markets contact, and if not getting any response just inputting the rate from the day before. Organisation setting LIBOR was doing no wrong, those playing it were, but those depending on it diverting any accountability to a black box of interest rates which was clearly not a black box. Absconding selves of responsibility.
Markets are indeed allocations of capital. But only when markets dont' get wound up in local optimals. As LIBOR. And bring havoc to everyone.
Why, the same as all other hi-tech companies -- remove the human from the chain, replace them by the computers, automate processes.
Will we still be able to speak about "greedy bankers" once it is all computers everywhere trading?