Is liquidity even a real answer? The HFTs only work because the market would be made a moment later. A buyer and a seller already exist. If they didn't, it wouldn't be high-frequency trading. it would just be "trading".
As far as I can tell, it neither benefits us, nor costs us. It siphons off a tiny fraction of money, too small to notice, but large enough in aggregate. Some parasite gets to survive, which is annoying if you look directly at it, but ignorable if you don't.
> The HFTs only work because the market would be made a moment later. A buyer and a seller already exist.
Not at all. If you, for whatever reason, need to sell right now, putting in a market order in an illiquid market can cost you a lot.
It can be discussed how big the contribution of HFTs to market making really is (large companies or exchanges often employ dedicated market makers, I believe?), but the benefit of market making itself should hopefully be obvious.
Sure, liquidity is a good thing. But you only need enough liquidity to make your trade. Adding more provides zero benefit.
If the HFTs only trade when the market is already made (or will certainly be, milliseconds later) then they're not really adding any liquidity. They're just doubling the liquidity which was already sufficient.
As far as I can tell, it neither benefits us, nor costs us. It siphons off a tiny fraction of money, too small to notice, but large enough in aggregate. Some parasite gets to survive, which is annoying if you look directly at it, but ignorable if you don't.