Michael Lewis wrote a book about high speed trading that has become a top seller on Amazon. This review of the book does a good job of summarizing the book which describes the mission of Wall Street banks. The object is to make money by any means possible and to stay one step away from the SEC which consistently fails in its mission which is to insure that trading is a fair game.
Bankers defend high speed trading by arguing that it increases the liquidity of the market. This form of liquidity is equivalent to sewage. It provides no value to society. The liquidity defense reminds me about a comment that Keynes made about the fetish of liquidity. He contrasted an investment in the stock market with an investment in the real economy. An entrepreneur does not create a business in order to sell it as soon as possible. It is very illiquid but it may provide a valuable service to society. The typical Wall Street investor prefers highly liquid investments so that money can be made on rapid turnover. The connection between real businesses and the ownership shares in those businesses are often at cross purposes.
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