Large hedge trades involve block shopping ELI5 version is that you need to pay for (1) working capital. This scales with the size of the block (capital cost).

Large hedge trades involve block shopping ELI5 version is that you need to pay for (1) working capital. This scales with the size of the block (capital cost). You also need to pay for (2) some lead-gen fees to get the block (service cost). You also have to pay for (3) a hedge on economics while your lead-gen process play's out. The cost of this hedge scales with size (just like capital cost), but also with vol (of underlying) and time (speed of lead gen process). If you don't cut the deal to cover your hedge (or put one on) you run the risk of massive losses from mino movemnets in the market (ie, if you have a <1% cent spread on 5 mill position and the stock spikes 10%). So a trade's profits: (A) scale+fees = Revenues (B) capital+hedge = Costs Both the hedge and the capital are proportionate to time. TLDR when you talk about HFT you are optimizing on time; and thus talking about (B) as much as (A) in terms of profits. Most of the optimization is on (B). What's unique here is that (B) is blind to the casual observer and to some extent, the market. But analytically, it influences profits and drives behaviour/incentive structure. If you dis-regard it out of hand, you're missing an important part of the picture.