You could not be more wrong. Providing liquidity at a razor thin spread is one of the toughest trades out there. Think about it: every passive order I place giv

You could not be more wrong. Providing liquidity at a razor thin spread is one of the toughest trades out there. Think about it: every passive order I place gives someone the option to trade with me until I can update it. If my price is wrong and I don't update, I will trade every time. If my price is right, I'll trade some of the time if I'm lucky. If I can tilt those odds in my favor by pricing more intelligently/quickly, my trades with uninformed traders slightly subsidize my losses to informed traders. Someone taking out/arbing a market needs a source of alpha. I need to protect myself from every source of alpha, at least on average. If market makers weren't collocated and looking at many exchange/products for data to price their markets, they would be driven out by fast liquidity takers, forced to quote lower size or a wider spread until they simply stopped getting trades (other faster, smarter market makers could still quote tighter spreads and would take all your market share).