Well articulated comment. Indeed it has become much more abstract. I guess one way to think of it is:
If someone is trying to raise money for an oven it may be fairly difficult to find people willing to invest. If investors are found, it may be difficult to agree on a fair arrangement.
The stock market has grown precisely because it offers price discovery and liquidity. Putting shares on an open market lets the fair price be discovered, and when investments are priced fairly they become more liquid, which means there is less risk to the investor b/c he/she can change his/her mind about the investment decision and not be stuck with an investment that no longer meets his/her objectives.
This lowered risk leads to more investment, which in turn leads to even fairer prices, and so on.
I think the key point about HFT is that to the extent that HFT provides liquidity (which it does by adding orders to the book at competitive prices) it helps with price discovery.
Since the "fair" price is a function of the risk various parties are willing to take by their willingness to risk trading at the wrong price, HFT not only makes prices fairer but its participants risk their own capital to vouch for the prices. Clearly if things turn out unexpectedly, the HFT firm is footing the bill b/c of its devalued inventory.
If someone is trying to raise money for an oven it may be fairly difficult to find people willing to invest. If investors are found, it may be difficult to agree on a fair arrangement.
The stock market has grown precisely because it offers price discovery and liquidity. Putting shares on an open market lets the fair price be discovered, and when investments are priced fairly they become more liquid, which means there is less risk to the investor b/c he/she can change his/her mind about the investment decision and not be stuck with an investment that no longer meets his/her objectives.
This lowered risk leads to more investment, which in turn leads to even fairer prices, and so on.
I think the key point about HFT is that to the extent that HFT provides liquidity (which it does by adding orders to the book at competitive prices) it helps with price discovery.
Since the "fair" price is a function of the risk various parties are willing to take by their willingness to risk trading at the wrong price, HFT not only makes prices fairer but its participants risk their own capital to vouch for the prices. Clearly if things turn out unexpectedly, the HFT firm is footing the bill b/c of its devalued inventory.