Look, from your standpoint you are correct. But try to look at it from the other side.
A problem for market makers is always adverse selection and trading against anonymous informed orderflow. In plain English: When someone, who knows more than the market maker hits him with size, the MM is very likely to face a loss and that's what MM's generally try to avoid.
So if I was a MM, I would love to provide liquidity for you when you want to buy 100K shares of stock, but I definitely would not short it against you. I'd rather scrape together some longs in front of you and sell it to you at a higher price.
Why would I trade against you and risk a blow up? Your definition of liquid markets is a whole bunch of muppets posting static limit orders that you can take at your convenience. And it was that way back in the "glory days"...but how many firms or locals from back then survived and how many of them blew up because they "provided liquidity" against a wise guy who bought 300,000 otm deltas on inside information? Sure, they had a license to steal obscene ammounts of money, because they were closer to the juice but most of them did not survive the final blow.
Those days are gone and if you want them back you are free to make a two sided market any day. There were always pickpockets and the whales always were the victims and always will be in the short timeframe. HFT is here to stay, if you are like it or not. So everyone of the "poor" money managers can keep complaining all they want or they can find a way to evade the robots.
A problem for market makers is always adverse selection and trading against anonymous informed orderflow. In plain English: When someone, who knows more than the market maker hits him with size, the MM is very likely to face a loss and that's what MM's generally try to avoid.
So if I was a MM, I would love to provide liquidity for you when you want to buy 100K shares of stock, but I definitely would not short it against you. I'd rather scrape together some longs in front of you and sell it to you at a higher price.
Why would I trade against you and risk a blow up? Your definition of liquid markets is a whole bunch of muppets posting static limit orders that you can take at your convenience. And it was that way back in the "glory days"...but how many firms or locals from back then survived and how many of them blew up because they "provided liquidity" against a wise guy who bought 300,000 otm deltas on inside information? Sure, they had a license to steal obscene ammounts of money, because they were closer to the juice but most of them did not survive the final blow.
Those days are gone and if you want them back you are free to make a two sided market any day. There were always pickpockets and the whales always were the victims and always will be in the short timeframe. HFT is here to stay, if you are like it or not. So everyone of the "poor" money managers can keep complaining all they want or they can find a way to evade the robots.
