You are seriously suggesting that a professor of finance who specializes in studying high-frequency trading is just bullshitting? In a 60-page academic paper on his area of professional expertise? And your view is based on nothing other than the causal intuition of an anonymous commenter called "tutufan"? Gosh, color me convinced.
Yes, market participants on average increase liquidity. Which is why you have that intuition. But it isn't specifically true in all cases. For example, take a simple commodities market where buyers and sellers show up in person to trade wheat. Farmers show up to sell; flour-makers show up to buy. With me so far?
If I place people on the main roads into town and have them buy up all the grain before it reaches the market, I will be reducing market liquidity, because anybody who needs wheat will be totally fucked unless I decide sell to them.
Yes, market participants on average increase liquidity. Which is why you have that intuition. But it isn't specifically true in all cases. For example, take a simple commodities market where buyers and sellers show up in person to trade wheat. Farmers show up to sell; flour-makers show up to buy. With me so far?
If I place people on the main roads into town and have them buy up all the grain before it reaches the market, I will be reducing market liquidity, because anybody who needs wheat will be totally fucked unless I decide sell to them.