* They are always willing to trade, so if someone wants to sell/buy a stock, they can get it from an HFT rather than needing to wait for someone who wants it long-term. (The HFT aims to sell it later to someone who wants it, they don't want to keep it).
This is called 'providing liquidity'
* They ensure prices remain 'in sync'. If prices don't match in some sense, then people need to worry about where to get a stock, rather than just what stock to get. The same goes for e.g. keeping stocks in sync with options. This way, someone who buys a stock gets an accurate price.
This is called 'arbitrage'
There is more to these concepts, especially arbitrage. But these are the core benefits of HFT.
It’s been shown by many (see Flashboys) that those “benefits” are completely exaggerated and are just an excuse to do HFT. The only real thing HFT benefits the bank accounts of the traders, and the traders will be the first to admit that.
Remember that most retail investor orders never hit the exchange because your brokerage firm is selling the orderflow to a HFT firm.
Overall, you can say the benefit is that spreads are cheaper to cross for investors. But, you could also make the counter-argument that if things became slightly more difficult to buy or sell, this inertia would prevent retail investors from over-trading by taking a long-term view.
> It’s been shown by many (see Flashboys) that those “benefits” are completely exaggerated and are just an excuse to do HFT. The only real thing HFT benefits the bank accounts of the traders, and the traders will be the first to admit that.
"Flashboys" is pretty discredited as a marketing exercise for IEX.
Flash boys is a pretty bad book that contains downright false information. How do you think that you can get free equity trades on RobinHood? HFT massively helps small investors, while (arguably) hurting bigger institutional players.
HFT is "stealing" from the big guys and giving to the little guys.
Flash boys was a great book for the uninitiated but you have to also take it with a grain of salt as it mostly parrots the point of view of those who got screwed by hft — meaning the ones who either disbelieved the possibility, weren’t imaginative / cunning enough to survive or otherwise thought they could shame the system into accepting the former status quo.
Your first point is literally just market making, which requires absolutely no HFT. Your second point (arbitrage to keep prices in line) also doesn't require HFT and I find it awfully difficult to imagine that (actual) people would need to worry about where to get their stock if arbitrage would occur at less than microsecond frequencies, because otherwise there might be significantly out of line prices at timescales people care about (many orders of magnitude slower).
Market makers need to be able to close arbitrage opportunities or they won't participate in the market. Speed matters just as much to them as it does to the prop traders.
Of course market makers wouldn't want to compete in a market where they are forced to make much slower trades than anyone else. But market making existed long before HFT, so it can't possibly be a unique benefit of it. You can argue that market making has become better because of HFT, but not that it requires HFT.
The technical aspects are more cross-cutting than your labels. "HFT" is for the most part just a latency threshold being crossed, whereas more functional roles such as market making, various forms of "pure" arbitrage, statistical arbitrage, prop trading, etc. have existed at the older latencies as well as the newer. All participants benefit from having lower-latency access than their competition, which creates a (thus far) neverending arms-race as firms leapfrog each other.
* They are always willing to trade, so if someone wants to sell/buy a stock, they can get it from an HFT rather than needing to wait for someone who wants it long-term. (The HFT aims to sell it later to someone who wants it, they don't want to keep it).
This is called 'providing liquidity'
* They ensure prices remain 'in sync'. If prices don't match in some sense, then people need to worry about where to get a stock, rather than just what stock to get. The same goes for e.g. keeping stocks in sync with options. This way, someone who buys a stock gets an accurate price.
This is called 'arbitrage'
There is more to these concepts, especially arbitrage. But these are the core benefits of HFT.