3 ms·

The infrastructure required to offer incredibly low latency trades and super high volumes seems like it would cost a heck of a lot of resources. I'm not convin

The infrastructure required to offer incredibly low latency trades and super high volumes seems like it would cost a heck of a lot of resources. I'm not convinced that all of these marginal gains makes up for these costs. I don't get the jump from describing an illiquid real estate market to this hypermarket with millions of trades a second. Are you telling me that it is a linear function? We will always need more trades, and more volume? What about the underlying economic activity? How does this follow any sort of market fundamentals? Are you really saying there is no upper limit? How could that make any sense at all?

tptacek 13y ago
No, there's surely a point at which the marginal utility of additional liquidity stops justifying the expense of providing it. We may even be far past it. But even if you stipulate that we are, it doesn't follow that interventions to suppress trading will do more good than harm, because we also know that prior to the advent of electronic trading, we had "not enough" liquidity. Surely the current system is imperfect in many ways, and I'm sure Nash has something to say about the competition among market makers of varying degrees of competence.