What benefit does short-term trading serve for society?

Question

All I've heard is that the markets become more efficient and that people can now buy/sell assets at the correct price at the moment of the trade. Please enlighten me. Thank you.

Keyser Söze 123 · Accepted Answer

Liquidity is probably the biggest benefit to existing shareholders and new investors.

faceslappingcompilation · Answer

without short term trading, bid/ask spreads would be very wide...because by definition, very few limit orders for trading would exist for any security.

For many securities, there would be no market at all...and no way for the average investor to have a clue what the current price is for a stock or bond.

However, there is a limit to the benefit of short term trading.

MXJ60606 · Answer

Agree with what you said here regarding HFT.

When I started in trading, 90% of futures volumes in the S&P 500 contracts was in open outcry .. the CME had just started messing around with Globex, but the markets were too thin. But it is ironic now for me to hear people complain about high frequency traders and how they are ripping people off ..

20 years ago it was "all those scumbag locals at the Merc" who were ripping people off.

So things change, but not really

Bumblebtuna_analyst · Answer

I bid municipal transactions competitively so I can give you some decent insight. Say town of bumfuck nowhere wants to issue some bonds to build a school by bonding property taxes, they’ll put their debt out on market and dealers will bid for it. More dealers = better bid, thus the TOWN will get a new school building as cheaply as possible. Less dealers = worse bid, less proceeds, and more interest all at the expense of the tax payer. So in this case the value of one added seat pays dividends for the market.

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What benefit does short-term trading serve for society?

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What benefit does short-term trading serve for society?

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