The purpose is to make money, as with _all_ businesses.
You think Apple want to make products and improve people's lives without making money? If so, why don't they reduce the prices? You think Google is all about search? No, it's about making money -- you get encouraged to go after... and I quote Sergey and Larry here, "markets of at least 1 billion" and make products that could potentially be worth 1 billion per year. Search my ass... it's all about making money as with most companies, including most of the the non-profit ones (non-profit hospitals that charge more than the for-profit, universities, etc)
"I don't know about "often," unless you're talking about trading individual issues where news events introduce a high degree of uncertainty. There's really only been one case of a market-wide drying up of liquidity, which lasted for about 15 minutes during the flash crash."
Actually not true. There was plenty of liquidity during the flash crash. It's just that the people who were selling ended up not liking the price they got. During the flash crash, the market was quite in order, except for a few stocks where all the bids were got (too much sell pressure) and the remaining bids were at $0.01... For most stocks, the market was just fine, just that the spread widened up considerably to take into account the temporary uncertainty in the market. Also, the flash crash took 5 minutes, not 15.
Flash crashes happen in human-traded markets took. Recently there was a flash crash in Indian stocks, where humans mark the trades. In fact, human-traded markets are worse: in 1987, the brokers just stopped picking up the phones, even if technically they had an obligation to do so.
"HFTs are tilting the balance in one way (helping the rich getting richer) "
WTF are you talking about?
1. HFT's are full of math and computer science people, which are usually drawn from the middle and lower classes.
2. Before HFT's, the people on the floor were inbred... That's right. There was a lot of passing down the torch since it was the type of job that you can learn by doing it. Oh, yes, and to claim that they were selecting by some "meritocracity", they were selecting for "street smarts" Haha! That only gave them carte blanche to hire their relatives
You think Apple want to make products and improve people's lives without making money? If so, why don't they reduce the prices? You think Google is all about search? No, it's about making money -- you get encouraged to go after... and I quote Sergey and Larry here, "markets of at least 1 billion" and make products that could potentially be worth 1 billion per year. Search my ass... it's all about making money as with most companies, including most of the the non-profit ones (non-profit hospitals that charge more than the for-profit, universities, etc)