Earlier quoted context omitted.
This is a really frustrating comment because it has so little to do with the real world of HFT. >In a sane market, there would be no advantage to making an investment and then selling it a few milliseconds later. And yet exchanges (NASDAQ, NYSE, CBOE, LSE, CME, Euronext, etc.) actually _PAY_ HFT firms to do this exact behavior since it provides actual, quantifiable benefit to the exchange and its customers. >It intro…
> Outside of a few bugs (such as the Knight Capital debacle you mention) and the Global Financial Crisis I don't know anyone who thought the Global Financial Crisis was a "bug." People went bankrupt, lost their retirement, lost their homes, lost their jobs. These are not small stakes. > It means that you no longer have to wait minutes or hours for your trades to execute and you can usually get the most up to date pri…
1. The GFC which wasn't caused by HFT
2. Certain instances where HFT bugs led to "flash crashes"
>If the point is to have a stock market where people make investments, HFT literally serves no purpose
This is patently false. Imagine a situation where the price of AAPL suddenly plummets because of an influx of sellers. If you want to close a long position with AAPL to lock in your gains, there will simply not be enough buyers for your shares to sell most of the time. The purpose of market makers is to make this sale possible because they are still able to profit or nearly break even from buying your shares (and are often contractually obligated to do so). Without someone taking the risk that market makers take, the stock would just free fall indefinitely and nobody would be able to take a profit off their investment.
A similar situation is options market making. People/institutional investors like Warren Buffet hedge their bets by purchasing options to protect them when their expectations fail to pan out. In such a situation, it is imperative that options are able to be purchased for a fair price and due to volatility the price from 10 minutes ago is almost certainly wrong. Likewise, it's important that a contract even exists for your desired purposes.
The purpose of HFT isn't just to give the most recent update, but rather to provide the essential pricing of various derivative instruments which depend on immediate values like the price, volatility, etc. of the underlyings. The immediate ability for your order to execute also protects you from the market's volatility, since you can essentially lock in your price as soon as you see the market moving. The blatant truth is that many modern portfolios consist of more than just unhedged long positions in a variety of stocks and as such a lot more complexity is required than "investing by a company's merits," even in the world of "value investing."