I did not mean to say costs would not have come down. I did mean to say costs would not have come down as much. There was a club, if not cabal, of Wall St. firms that actively acted against electronic trading, ECN’s, ATS’s, and HFT’s - not because they were bad, but because their protected profits from market-making and high commission rates were threatened.
Without these advancements, specifically including the HFT’s and the brokers that embraced them, it’s a fact fully-loaded costs of trade and settlement would not have come down as much as they have.
People complain (as witnessed in this CNBC clip) about the billions that HFT’s make, but say not a word about the 10’s or 100’s of billions saved because of lower aggregate trading costs.
The fact remains that, whatever small cost per-share or trade is resultant from the “friction” of trading (embedded costs), long-term investors should view this as largely irrelevant to their potential or actual investment returns. Don’t believe me - do the math. What does 1/10-cent of incremental cost do to your investment return on stock you buy and hold for 5-years before selling? We’re talking 100ths of a percentage point.
Now if you’re a trader, not an investor, and trying to out-gun a HFT from your e-Trade account while sitting in your home-office, then good luck to you. You’re fighting a nuke with a water-pistol. But then again, individual traders trying to beat the Wall St. pros has never been a reliable avocation.