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Comment by GusRuss89 | Hacker News Reader

Do the companies that do this make any claims about how they benefit society? To me, stock traders in general seem a departure from the idea that money is a result of providing value to society, but arbitrageurs seem even further detached. I'd be interested to hear if there are arguments I haven't thought of.

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High frequency traders create liquidity. Arbitrage in general helps ensure that prices are uniform across geographies and across linked securities (e.g. options are priced appropriately vs. the underlying asset). You can argue that there is no incremental value in going to shorter and shorter timescales, but fundamentally this mechanism is how information moves around the economy.

There used to be less sensitivity to the receive-side time by exchanges, but in many cases there had been an emphasis on fairness and high res timestamps (they sell colocation services). Now, many times the first through the post wins. This creates a constant arms race and narrows the field to a handful of competitors. Many companies that survived in the fat tail can no longer do so.

A guy is willing to buy some shares at 101 on exchange A. Another guy is willing to sell the same shares at exchange B for 99. Neither of them has the budget to connect to both exchanges.

HFT has connections to both and can see the cross. Everyone is better off.

This might be different in the US due to NMS, but HFT strategies are all pretty similar: they can provide liquidity better if they are fast, and other people can take advantage of that.

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