This seems like a back and forth that's quibbling about words. I didn't say there's anything wrong with arbitrage; the critique is the privileged access to market information and the ability to profit off it without adding any value to the rest of the market.
All things equal, I would prefer to trade on an exchange that makes an effort to provide equal access, and one that doesn't artificially inject middlemen into transactions that don't require them.
The way that you think middlemen inject themselves into transactions that don't require them isn't what happens in the actual world. You're worried about a problem that doesn't exist.
You're worried about a problem that doesn't exist.
Even if empirically it is non-observed, its illegal. So it is a problem, just one solved by law. Now, IFF your're willing to assume that nobody has ever/will ever transgressed such a law...you could hold this position 'logically'. But Few would be so unwise "in the actual world" to do so (and would likely prove foolish).
It's illegal if your broker does it. He has a contractual (and legal) obligation to act on your behalf. This is completely different from the kind of thing that Michael Lewis claims is happening in his book.
you think middlemen inject themselves into transactions that don't require them
I'm responding more to this (and more as a general concept).
If given the opportunity, people would do this. So it's useful to dispel the notion that because its "not seen" it's not a problem. It might not always a be problem, but many it is and others it's also "annoying".
Stepping outside of markets for a second, this is why M&A deals have exclusivity and breakage terms. The theory/practive on why you do this involves assymetric information and something economists refer to as "opportunism". Opportunism[1] is exploiting legal abiguity for narrow self interest.
The more complex the legal/transaction structure the wider the attack surface for "opportunism" (because it's proportional with deal complexity). In slow and complex deals like M&A at a certain point it becomes an issue and so safeguards are taken.
In fast and simple deals like buying stock on the box or what not, the scope is very limited. The glaring example is the broker issue you highlight. But as the deal structure gets more complex, this risk rises.
Now, the attack surface for opportunism is proportional to deal complexity as mentioned above. This is legal/structure but also now needs to consider execution and # of counterparties. Limiting counter-parties (ie, middlemen) reduces this "attack surface" (if you will). Because each of them needs to be monitored/paperwork delath with etc. This is why such uncecessary interventions are structured out of deals. Typically by way of convention/courtesy if not expressly by things like ethics codes & stronger (ie, exchange regs+laws).
This is a long way of saying that the institutional integrity of markets hides a lot of problems. This is a good thing. But not to be taken for granted. The cost of undermining these institutions/trust etc. is not insignificant. Because it means you have to solve all these problems again in new ways.
We've got a system specifically designed to prevent the kind of thin you're talking about.
It's also a system where every single trade is recorded in detail that anyone who wants can look at. No one is pointing at this data showing the smoking gun of the kind of front running you describe.
You're just saying "well, people are shady, so it's probably happening anyways." That's an incredibly weak argument in the face of a stack of evidence on the other side the biggest piece of which is the dramatically reduced cost of liquidity. If such shadiness was happening the cost of liquidity would be going in the other direction.
When talking about crimes people refer to means, motive, and opportunity. You've certainly got the motive part, but you're completely ignoring means and motive.
Then I think we're just getting hung up on the labguage concerning what is 'necessary' or 'un-necessary'. I'd actually be interested to hear about the level of abstraction of your systemic data, just to be more clear on where you are coming from. Again, my comment up-thread was not in any way impugning a particular trade or trade structure. If you are a practitioner, you're well aware of the level of detail required to opine on something so specific. As a general rule though the more complex any transaction is (whiteboard+lawyers) the more legal grey there are. That is a statement I'm comfortable with in general.
All things equal, I would prefer to trade on an exchange that makes an effort to provide equal access, and one that doesn't artificially inject middlemen into transactions that don't require them.