Yes its opinion, even the experience quoted is not some hard fact but it tallies with what i see in data in my own systems. Things are not getting easier and we dont have easy large edges.
We also do not have any data against that. Its also an assumption / opinion that ‘middle men’ are taking more and more profits. That to me will be a broken system too, but i dont see it. Margins are getting lower on average over a long period.
From my own experience, based on assumption that its HFT that fills up the orderbooks in most areas ie market making, I am happy with what they provide and i do pay a decent cost for that. Without some sort of depth in orderbook, i wouldnt be able to trade reliably in a not very liquid market.
From my limited experience, if we assume larger stocks have more middle men, my slippages have always been lower on average in larger stocks. Beyond that we can keep speculating i guess.
At a single point of time, more market makers should mean tighter spreads. They need to make profits but they also need to be able to provide liquidity to make those profits.
If a HFT tries to push price to a wrong price, in theory a competing HFT could take advantage of that. If we have a good ecosystem, hopefully this is how it works. They could collude perhaps, dunno …
imo, if there are situations like these, then SEBI has to fix the issue. Intuitively, to me this will only happen when things are manipulated in some way ( so the Jane street thing is probably an example). Not in the natural order of things as everyone is competing against one another, both traders and active investors.
What exactly is a producer here ? What is a middle man ?
Is an investor booking profit not a middle man ? Why ?
Do you mean to restrict to IPOs only ?
How do you think mutual funds will accumulate large positions without enough people taking opposite positions, when most people are only buying ? What happens to the price if most people are only buying ? Is that a fair price ? Is it fairer to existing holders vs new buyers ?
To me this is a ridiculous question, and one where you too do not have any initial data to atleast justify the question.
You can try to look for markets with least trading, but i dont know how to find one.
USDINR had some large disruption, perhaps look at that.
You can only look at the gilt markets to see an extreme example of not having order book depth.
To me, only illiquid markets have a potential for incorrect prices causing harm, whether in an illegal pump or dump or a legal market making in something like gilt - you give liquidity to someone in need of an exit.
Again, as i said before the middle men are in competition. That is the point. If you make a mistake, i can profit off it. So if a price swing is incorrect you will have opposing positions putting it back into place. Ofc, nobody knows what the exact price is, but we assume that collectively it makes things efficient enough.
A simple example of how trading/ middle men might provide value to others. It is well known that we have a short intraday bias overall in equity. So traders have an incentive to short. Its not very large, so we cant just short anywhere and it might even be absent in some years, but it is there. Now this incentive to short intraday, can give liquidity to people buying through the day. This is just a small example, now i imagine we have many of these often in opposition to one another and that keeps things in check and in cycles.
Also, i have heard in multiple places, that before HFT, we had the pit guys and spreads were worse.
Maybe search if HFT profit pool is shrinking, per unit of volume in the market.