Ok that explains why they want to do it, but how does it benefit the market to allow that? How does it benefit the consumers and corporations? In other words, what is the argument against creating a law that requires a minimum of 1 second batches for example?
Exchange traded funds depend on special traders who buy the underlying stocks (like AMZN and MSFT), and sell them in exchange for the ETFs (like SPY and VOO). If the individual stocks are more valuable the special traders can buy the ETF shares, exchange them for the individuals, and then sell those for cash. If the ETF is more valuable, they can buy the individual stocks, exchange them for the ETF, and sell the ETF for cash. This is what keeps Index funds matching the underlying index.
Whenever the prices are out of whack, one of the assets can be exchanged for the other. However, there is the concept of tracking error, where by the value of the ETF doesn't track its index. High frequency traders are constantly trying to take advantage of this mismatch (i.e. arbitrage), and as a result the fund's tracking error is moved very close to 0 (i.e. it achieves the goal stated in the prospectus).
Retail investors (like you and me) benefit from this because the price of the index fund is kept in line, and HFT people get to make a little money being keeping it that way. Who would want to make a law that hurts everyone involved by preventing them from entering a mutually beneficial relationship?
I don't care about the greediness, I just care about fairness. Why should GS get the best trades just because they can make a deal to get the shortest ethernet cables?
