"The only reason we care about liquidity is that you want people the market serves to be able to execute productive trades more quickly and cheaply. If it hasn't gotten cheaper, that's good evidence that HFT trading is not socially useful."
That serves as some evidence that it is not socially useful. It completely ignores "more quickly", and for the strongest argument you should also show that nothing else has happened in that time period that would have increased costs and slowed transactions but for HFT.
"the most profitable HFTs aren't liquidity-generating; they are liquidity-taking"
Sure, the easiest way to be among the most profitable HFTs is to cheat, and the way you act on early information is active orders. That doesn't mean they are the most prevalent - I was not able to find actual statistics on the number of each class (aggressive, mixed, passive) represented in the market, but the sample count for trades of aggressive firms was less half of that for the other two.
Edited to add: Actually at a slightly closer glance, it looks like they were looking only at firms that didn't lose money, which seems pretty worthless. "Active strategies have more divergent outcomes" seems a better explanation of the data then "active strategies make more money" - particularly if the reason for the lower sample count is more "active" firms lost money.
None if this is to say that I think there's nothing worth fixing in our financial system, I just want to be sure we're using the evidence we have appropriately.
That serves as some evidence that it is not socially useful. It completely ignores "more quickly", and for the strongest argument you should also show that nothing else has happened in that time period that would have increased costs and slowed transactions but for HFT.
"the most profitable HFTs aren't liquidity-generating; they are liquidity-taking"
Sure, the easiest way to be among the most profitable HFTs is to cheat, and the way you act on early information is active orders. That doesn't mean they are the most prevalent - I was not able to find actual statistics on the number of each class (aggressive, mixed, passive) represented in the market, but the sample count for trades of aggressive firms was less half of that for the other two.
Edited to add: Actually at a slightly closer glance, it looks like they were looking only at firms that didn't lose money, which seems pretty worthless. "Active strategies have more divergent outcomes" seems a better explanation of the data then "active strategies make more money" - particularly if the reason for the lower sample count is more "active" firms lost money.
None if this is to say that I think there's nothing worth fixing in our financial system, I just want to be sure we're using the evidence we have appropriately.