DeepSeek is a subsidiary of a relatively successful Chinese quant trading firm. It was the boss' weird passion project, after he made a few billion yuan from his other passion, trading. The whole thing was funded by quant trading profits, which kind of undermines your argument. Maybe we should just let extremely smart people work on the things that catch their interest?
Interest of extremely smart people is often is strongly correlated with potential profits, and these are very much correlated with policy, which in the case of financial regulation shapes market structures.
Another way of saying this: It's a well-known fact that complicated puzzles with a potentially huge reward attached to them attract the brightest people, so I'm arguing that we should be very conscious of the types of puzzles we implicitly come up with, and consider this an externality to be accounted for.
HFT is, to a large extent, a product of policy, in particular Reg NMS, based on the idea that we need to have many competing exchanges to make our markets more efficient. This has worked well in breaking down some inefficiencies, but has created a whole set of new ones, which are the basis of HFT being possible in the first place.
There are various ideas on whether different ways of investing might be more efficient, but these largely focus on benefits to investors (i.e. less money being "drained away" by HFT). What I'm arguing is that the "draining" might not even be the biggest problem, but rather that the people doing it could instead contribute to equally exciting, non-zero sum games instead.
We definitely want to keep around the the part of HFT that contributes to more efficient resource allocation (an inherently hard problem), but wouldn't it be great if we could avoid the part that only works around the kinks of a particular market structure emergent from a particular piece of regulation?
