The finance sector contributes only 7% of GDP, correct.
One of the sources I had in mind [0] cites 31%, but that was revenue as a proportion of GDP, which doesn't really make sense. However, the financial sector takes about 30% of US profits [1].
With respect to trading only once a day, I don't think your ad absurdum counterarguments hold water.
The HK stock exchange used to trade 4.5 hours a day, from 10 to 12, and then after a generous 2 hour lunch break from 2 to 4:30. How is trading 8 or 12 hours a day better for pension funds?
Price discovery with a limit order book that's cleared once a day might work just as fine as when it's spread out over hours, maybe even better.
Think about some major event affecting a company happening on the weekend. Then everyone can put in buy/sell orders with adjusted prices, and they'll be cleared during the morning auction. How is that worse than if the event happens intraday, and only the most switched on automatic HFT will pick off people still quoting at the old price, then the professional traders in hedge funds will pick off people?
As I said, the difference would be that the gains of the fast movers would instead be distributed among those on the "wrong side" of the news. Why should price discovery be worse?
Finally, what makes you think that liquidity and bid-ask spread concentrated in a minute a day would be worse than spread out over many hours a day?
With respect to trading only once a day, I don't think your ad absurdum counterarguments hold water.
The HK stock exchange used to trade 4.5 hours a day, from 10 to 12, and then after a generous 2 hour lunch break from 2 to 4:30. How is trading 8 or 12 hours a day better for pension funds?
Price discovery with a limit order book that's cleared once a day might work just as fine as when it's spread out over hours, maybe even better.
Think about some major event affecting a company happening on the weekend. Then everyone can put in buy/sell orders with adjusted prices, and they'll be cleared during the morning auction. How is that worse than if the event happens intraday, and only the most switched on automatic HFT will pick off people still quoting at the old price, then the professional traders in hedge funds will pick off people?
As I said, the difference would be that the gains of the fast movers would instead be distributed among those on the "wrong side" of the news. Why should price discovery be worse?
Finally, what makes you think that liquidity and bid-ask spread concentrated in a minute a day would be worse than spread out over many hours a day?
[0] https://www.investopedia.com/ask/answers/030515/what-percent...
[1] https://conversableeconomist.com/2022/09/13/financial-servic...