Likewise, day-traders have fueled the popularity of ECNs, or electronic communication networks, which match buyers and sellers automatically. ECNs make their money by charging a fixed fee for every share traded, circumventing the middlemen entirely. Marketmakers, in turn, have been forced to narrow spreads further to stay competitive with the spread-free ECNs. Day-traders push trading technology forward. Perpetually in search of hot new technologies that can give them even the tiniest edge, day-traders have been willing to shell out big bucks to reward technological innovators.
Day trading makes the stock market more stable.
Okay, that's not true. And it's hard not to believe that all the huffing and puffing in day-trading chat rooms has some effect on stocks. In the case of many Internet stocks and microcaps, they undoubtedly do. But no serious student of market pricing has found concrete evidence that day-traders are the culprits behind increasing volatility in the market as a whole. But Malkiel's own studies suggest volatility is more closely correlated with institutional ownership.