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0 pointsinfecto7mo ago0 comments

Market makers or other similar HFT are providing liquidity in an efficient manner to the markets. The benefit is often debated but for the majority of retail and institutional investors, spreads have never been lower. Instead of a guy at the floor swallowing large margins up, you have bots electronically vacuuming pennies.

Of course the whole point for a firm like Jane Street is to make money. To make money means they are competing with someone and that someone could be a loser depending on the scenario.

My own opinion, most folks don’t like market makers or folks who work in financial markets are simply not well informed. The efficient allocation of capital is a valuable service to humans in a capitalist society. People often forget how wide spreads were in the past and that humans were swallowing that margin up with little competition. Now market making is highly competitive and because of it investors both small and large benefit from it.

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Balinares7mo ago

The societal value of liquidity and a narrower bid/ask spread, while non-zero, is not even remotely commensurate with the bucketloads of cash that the top firms bring in.

It's mercenary work, plain and simple. Advanced, interesting, full of juicy maths, highly competitive, rewarding, but mercenary. No one's doing this job for the good of the world, come on.

Give some of your earnings to trans defense NGOs, now that makes a difference and I'll be personally grateful.

infectoOP7mo ago

I don’t disagree that people don’t get into HFT because they’re trying to save the world. It is mercenary in the sense that the rewards attract talent. But calling the work itself valueless misses the point, liquidity and price discovery are public goods. You notice them most when they don’t exist, and the cost of capital spikes for everyone.

As for the “bucketloads of cash,” that’s just how competitive advantage in markets gets priced. If firms didn’t deliver something real, the money would dry up quickly. Markets are brutally efficient at punishing dead weight.

Philanthropy is great, give to causes you care about. But it’s worth recognizing that the system enabling those donations in the first place is the same one that relies on liquidity, efficient spreads, and functioning markets.

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