If there’s one general lesson you learn from options theory that transcends its uncertain details, it’s that every good thing has its downside. Positive curvature is accompanied by rapid time decay. Everything in moderation, therefore.
Liquidity is not an unmitigated good, and the world recognizes this practically in most things by creating friction and viscosity to slow us down. Without friction nothing would happen and no one would exist.
You can have friction in time. People used to get engaged before they got married, wait for a marriage license, pass blood tests, etc. Same in reverse. If you join a gym you have a few days to change your mind. Wall Street partnerships and their illiquidity made firms think long term.
You can have friction in space. Coop apts outlaw or tax apartment flipping for the benefit of the long-term residents. Some stock markets have circuit breakers to slow things down. In some countries stock buying and selling requires a stamp tax. Glass-Steagall imposed barriers on mixing lending with trading.
Too much friction may be bad, but a little friction is a good thing.
Statistical arbitrage claims to be a liquidity provider and therefore good for you. It’s not so entirely self-evident to me. And if it does provide liquidity, is it the kind of liquidity you want if you’re a long-term resident of the market?
People have to extrapolate to reach conclusions. Lack of estrogen is linked to osteoporosis so you should take supplements. A little liquidity is good therefore more is better. Not so obviously obvious. Lowering friction sounds good but maybe it’s a slippery slope.