[TheLegace]

I don't know if you have been on the other side of what market makers do, but its not exactly a day at the beach. Once you gain enough insight to see whats going on the charts you just see it as a graveyard of traders positions, stop losses and their capital. This happens every minute the market is open at every timeframe.

Have you ever wonder why the markets appear so irrational? Great economic data and the worse drop in months or vice versa. These are the expectations, emotions and psychology of the masses that are liquidated by market makers. Have you also just had a gut instinct to buy or sell and market moves completely opposite beyond your psychological limit. Only for it to start moving into profit once you have closed at a huge loss. This is all market makers do all day.

In principle there is nothing immoral here. Participants are all taking risks voluntarily, no one is forcing you risk trading the stock market. But in practice market makers take positions at the stop losses 90% of market participants giving them significantly overwhelming supply of assets at the best prices, while everyone else sees consistent intractable losses.

This is a Darwinian environment where only the biggest, fiercest and most aggressive players will win by killing weaker, smaller and less knowledgeable players. The only way for a small fish to win is to understand the rules the market makers play by. Their strengths, desires, weaknesses, limitations and once you do you realize that this was someone's capital, but it's also capital not going to the market makers.

[PaulDavisThe1st]

I think you intended to reply to me (GP), not the parent.

You're ignoring my objection to this stuff, which has nothing to do with immorality and everything to do with with the waste and misdirection of resources. Why do people participate in this stuff? Because someone might get rich. From my POV, that's a waste and misdirection of resources. People getting rich is not the right motivation for pareto or utilitarian optimal allocations.

[RandomLensman]

People are entitled to do things that are not an optimal resource allocation. Social systems that block that tend be very nasty.

[stevenhuang]

Capitalism and people getting rich is for better or worse exactly the stabilizing factor that has lead to the success of the modern world we take for granted. Capitalism is the worst except for all the others.

I empathize that it appears the case it's not an optimal allocation, but to say you know it's a misallocation leans overly simplistic.

What you see as misdirection of resources is the product of competitive market forces that drive innovation and efficiency. And the market often finds value in ways not immediately apparent.

Is less efficient resource arbitration (futures, forex) worth the trade-off? Producers can make their own market and set their own prices. But do that in an information vacuum and there will be increased deadweight loss in the form of higher bid-ask spreads, increasing costs, reducing economic activity.

There are more benefits in the form of reducing volatility and increasing liquidity.

It is not at all as obvious as you make it that society would be better off had HFTs and similarly received sorts of "financialization" not exist.