Is (Algorithmic) Trading Evil?

It is popular to accuse traders (including both algorthmic and discretionary) of being "speculators" who take advantage of the general population by "making money from driving prices up or down".  This criticism indicates a widespread ignorance of the nature of trading and the role it plays in the markets.  The only thing that is correct in the statement is that trading activity drives prices up or down.  It is important to keep several other things in mind:

When judging the results of trading activity, it is important to see the big picture.  "Speculators" were accused of driving oil prices up in 2008.  But it is those same speculators who drove oil prices down later that year.  Interestingly, traders were attacked in the media during the increase in prices, but were ignored when the price decreased again.

When it comes down to it, trading activity simply ensures that prices in the market (of everything that is traded) move fairly quickly to a fair price.  Of course you have to define a fair price.  Here the fair price is a price that is generally agreed upon by the market as a whole, taking into account all available relevant information.  This may not be perfect.  There are alternatives.  The government could set prices, or the big banks could set prices.  But the former option has been shown to fail in many countries around the world, and I cannot imagine that the latter option would be good for anyone except big banks.

There is only one criticism of algorithmic trading that I find valid.  In recent years, it has attracted much of the top scientific talent in the U.S.  In particular, many top students in mathematics, statistics, computer science, physics, and other disciplines are drawn to the industry, often for the money and sometimes for the challenge.  It would be fair to argue that this has partly depleted the ranks of scientific researchers.

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