1) Are there places / markets that ST Arb and HFT won't go because it's too illiquid or too idiosyncratically volatile?
2) Are there edges so small that you won't chase?
3) Are there one-off opportunities (2010 flash crash, UST flash crash recently, etc.)?
4) Is there a set of strategies that manual traders know (which they should probably transfer to HFT strategies) that the HFT/ST arb shops don't know?
I think the answer to all of those questions is "yes". They probably take on a lot more risk per trade. They would also be better served by automating their strategies. But I think it's not as cut and dry as you state.
Each individual trader might be "amateur" -- but the firm as a whole might end up with a decent return / risk.
1) Are there places / markets that ST Arb and HFT won't go because it's too illiquid or too idiosyncratically volatile?
2) Are there edges so small that you won't chase?
3) Are there one-off opportunities (2010 flash crash, UST flash crash recently, etc.)?
4) Is there a set of strategies that manual traders know (which they should probably transfer to HFT strategies) that the HFT/ST arb shops don't know?
I think the answer to all of those questions is "yes". They probably take on a lot more risk per trade. They would also be better served by automating their strategies. But I think it's not as cut and dry as you state.
Each individual trader might be "amateur" -- but the firm as a whole might end up with a decent return / risk.